TRUSTS  OR 

COMPETITION  ? 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


r. 


TRUSTS 


COMPETITION? 


BOTH  SIDES  OF  THE  GREAT  QUESTION  IN 
BUSINESS,  LAW  AND  POLITICS. 


EDITED  BY 

A.  B.  NETTLETON,  A.  M., 

hi 

Former  Assistant  Secretary  of  the  Treasury. 


PUBLISHERS: 

THE  LEON  PUBLISHING  COMPANY, 
CHICAGO.  1900 


r 

M 

1900 


SUMMARY  OF  CONTENTS. 


OUR  INDUSTRIAL  REVOLUTION— la  It  a  Substitution  of  Mo- 
nopoly for  Competition? — The  Case  Stated — The  Argument  for  the 
Trust — The  Argument  Against — The  Origin  and  Development  of 
Trusts — Manner  of  Formation— Nature,  Working  and  Effect — 
Uses  and  Abuses — Are  They  Permanent  or  Transient? — Their 
Relation  to  the  Workingman,  to  the  Farmer,  to  General  Business 
and  the  Public  Welfare— Effect  on  the  Smaller  Cities  and 
Towns — Effect  on  Prices  of  Commodities — Is  "Competition  the 
Life  of  Trade?" — Ethics  and  Economics  of  the  Subject — Expert 
Opinions,  Favorable  and  Unfavorable— Monopolies,  Old  and 
New— Concerning  the  Struggle  for  Existence  and  Survival  of  the 
Fittest — List  of  All  Principal  Industrial  Trusts  in  the  United 
States,  with  Names,  Capital,  Scope,  etc. — Organized  Labor  and 
Organized  Capital — Synopses  of  All  State  and  Federal  Anti-Trust 
Laws — Leading  Court  Decisions — The  Trust  in  Politics — The 
Tariff  and  Trusts — Does  the  Trust  System  Shut  the  Door  of  Oppor- 
tunity for  Young  Men? — Trust  Remedies — Shall  Trusts  be  Regulated 
or  Suppressed? — Is  a  Trust  a  Natural  Evolution  or  Caused  by 
Monopoly -Hunger? — The  Trusts  and  Traveling  Men — Banks  and 
the  Trusts — Attitude  of  Press  and  Pulpit — Does  the  Trust  System 
Lead  to  Socialism? — A  Chapter  of  Possible  History  (A.  D.  1925) — 
The  Colleges  and  the  Trusts:  Statements  of  Views  by  Professors 
of  Political  Economy  at  Leading  Colleges  and  Universities — A 
Sketch  and  Defense  of  the  Standard  Oil  Trust — Editorial  Com- 
ment Thereon — Do  Trusts  Prevail  in  Europe? — The  Law  ^,nd  the 
Trusts— Are  Trusts  Legally  Invulnerable? — Strong  Affirmative 
Argument  by  an  Eminent  Lawyer — Attitude  of  American  Courts 
Toward  Monopoly — Principal  Addresses  at  National  Non-Partisan 
Conference  on  Trusts,  September,  1899 — Views  of  Hon.  William  J. 
Bryan — Recommendations  Affecting  Trusts  by  Presidents  Har- 
rison, Cleveland  and  McKinley  —  The  Question  of  Department 
Stores. 


Copyright  by 

A  B.  NETTLETON, 

1899. 


INTRODUCTORY  NOTE. 


EDITORIAL  ROOMS,   AMEHICAN  MONTHLY   KEVIEW  OP  KEVIBWB, 

New  York,  December  22,  1899. 
My  Dear  General  Nettleton: 

I  am  more  than  ever  impressed,  after  attending  the  Chicago  Confer- 
ence on  Trusts  and  Combinations,  with  the  thought  that  what  we  need 
most  of  all  at  the  present  stage  of  the  discussion  is  enlightenment.  Great 
advances  have  been  made  of  late  in  medical  science  by  reason  of  a  wholly 
new  care  and  skill  in  diagnosis.  Firing  heavy  artillery  into  the  tree-tops 
is  not  the  best  way  to  kill  squirrels,  nor  is  bird-shot  at  short-range 
effective  against  modern  fortifications.  In  medicine,  in  hunting,  and  in 
war,  men  adapt  means  to  ends.  It  should  also  be  true  in  statesmanship 
that  when  men  endeavor  to  rid  the  body  politic  of  an  ailment,  they  should 
understand  the  history  and  nature  of  the  disease. 

We  have  entered  upon  a  new  period  in  the  history  of  the  business 
world,  that  seems  to  have  grown  logically,  if  not  inevitably,  out  of  a 
century  of  invention  and  organization  which  has  enormously  multiplied 
the  volume  of  productive  capital.  The  situation  involves  changes  so- 
sharp  and  so  varied  as  to  cause  practical  loss  and  hardship  to  tens  of 
thousands,  and  serious  apprehension  to  others  by  the  hundreds  of  thou- 
sands. It  is  a  situation  that  concerns  everybody,  and  that  unquestionably 
calls  for  a  certain  amount  of  governmental  action.  But  before  such  action 
can  be  taken  wisely  or  conclusively  a  great  deal  must  be  kuown,  both 
as  to  principles  and  as  to  facts. 

We  are  beginning  to  create  a  body  of  literature  on  the  subject  of  trusts- 
and  combinations  of  capital  that  will  be  very  useful  in  the  preliminary 
work  of  education.  I  am  glad  to  know  that  you  are  editing  a  book  on 
this  timely  subject;  and  with  my  knowledge  of  your  exceptional  qualifi- 
cations for  obtaining  and  presenting  the  mature  views  of  the  best  thinkers 
on  all  phases  of  the  questions  at  stake,  I  am  confident  that  the  book  will 
be  not  only  welcome,  but  widely  useful. 

Sincerely  yeurs, 

ALBERT  SHAW. 


TO  WHOM  IT  MAY  CONCERN. 


Candor  requires  this  word,  although  it  has  little  importance,  ex- 
cept to  the  writer:  I  entered  upon  a  study  of  the  trust  system,  de- 
sirous only  of  ascertaining  what  were  the  facts,  what  the  literature 
of  the  question  revealed  and  what  were  the  strongest  respectable 
reasons  that  could  be  advanced  for  and  against  the  proposed  indus- 
trial revolution.  Previous  casual  examination  had  inclined  me  to 
the  opinion  set  forth  in  Chapter  I,  namely,  that  the  new  movement 
was  legitimate,  beneficial  and  permanent,  requiring  only  regulation 
and  guidance  to  safeguard  the  public  welfare.  So  far  as  I  had  any 
material  interest  in  the  subject  it  led  in  the  same  dkection.  My 
investigation  extended  through  the  greater  part  of  a  year.  Wher- 
ever possible  (and  I  had  some  special  facilities)  I  went  to  original 
sources  for  information,  both  at  home  and  abroad.  The  results  of 
iny  search  were  subjected  to  as  candid  and  thorough  consideration 
as  I  was  able  to  give  to  one  of  the  most  absorbing  economic  and 
ethical  problems  ever  confronted  by  mankind.  My  sincere  and  un- 
qualified conclusions  are  substantially  summarized  in  the  leading 
propositions  set  forth  in  "The  Argument  Against  the  Trust,"  in  Chap- 
ter II,  and  in  the  latter  part  of  Chapter  V,  entitled  "Concerning  Rem- 
edies." In  a  word,  1  have  emerged  from  my  study  of  the  monopoly- 
trust  movement  profoundly  convinced  (1)  that  it  is  fundamentally 
wrong  in  theory  and  incurably  evil  in  operation;  (2)  that,  in  the 
luminous  words  of  President  Hadley  of  Yale,  it  is  a  system  which 
"makes  increased  economy  in  production  a  pretext  for  monopolizing 
the  market;"  (3)  that  its  claimed  advantages,  so  far  as  they  are  legit- 
imate, are  equally  attained  by  corporations  and  concerns  engaged 
in  modern  large-scale  production  with  adequate  capital,  without  any 
resort  to  monopoly;  (4)  that  the  trust  system  forcibly  adds  to  natural 
industrial  development,  which  all  approve,  the  alien  element  of  arbi- 
trary monopoly,  which  none  should  tolerate;  (5)  that  (unless  it  is  to 
serve  as  a  stepping-stone  to  socialism)  the  trust  system  will  endure 
only  until  the  people  give  to  their  highest  courts  an  opportunity  to 
apply  the  law,  not  to  its  regulation,  which  would  be  futile,  but  to 
its  removal,  which  is  entirely  practicable.  For  this  radical  reversal 
of  opinion  on  a  great  and  pressing  question,  I  offer  no  word  of  apology. 

A.   B.  NETTLETON. 


PREFACE. 


Since  the  civil  war  no  question  has  so  profoundly  stirred  the 
thought  and  interest  of  the  American  people  as  the  now  upper- 
most one  of  the  Industrial  Trust.  With  four-fifths  of  the  great 
manufacturing  industries  of  the  country  practically  consolidated, 
each  under  a  single  ownership,  and  with  competition  in  those  in- 
dustries largely  eliminated,  the  well-nigh  universal  apprehension 
and  discussion  are  justified.  Two  squarely  opposite  opinions  are 
held  concerning  the  trust  movement.  One  regards  it  as  a  nat- 
ural and  probably  inevitable  outgrowth  of  modern  economic  con- 
ditions, and,  therefore,  to  be  welcomed  and  utilized  as  previous 
generations  accepted,  adjusted  themselves  to,  and  profited  by, 
modern  machinery  and  the  factory  system.  The  other  holds  it 
to  be  an  artificial  development,  an  economic  impertinence,  a 
forced  substitution  of  private  monopoly  for  open  competition, 
rendered  possible  by  special  causes  and  constituting  a  dangerous 
Dassault  upon  the  public  welfare.  One  side  contends  that  at  most 
the  trust  system  should  be  guided  and  regulated  by  law,  to 
prevent  possible  abuses  and  assure  the  greatest  advantage  from 
its  advent.  The  other  side  as  stoutly  contends  that  inasmuch  as 
private  monopoly  is  always  and  everywhere  a  public  enemy,  and 
effective  competition  a  necessary  safeguard  of  the  people,  pal- 
liatives are  either  out  of  place  or  of  only  transient  importance, 
while  complete  suppression  of  the  trust  through  a  prompt  return 
to  a  competitive  system,  is  the  only  adequate  remedy. 

The  literature  of  the  trust  question  has  been  mainly  of  a  fugi- 
tive character,  scattered  through  a  wilderness  of  periodicals  and 
special  pamphlets,  and  hence  inaccessible  to  all  except  the 
few  who  have  had  both  the  patience  and  the  opportunity  for 

7 


8  PREFACE. 

research.  Current  debate  in  the  public  press  and  from  the 
platform  is  necessarily  disconnected  and  usually  presents  one 
side  to  the  exclusion  or  distortion  of  the  other.  The  modest  aim 
of  the  writer  has  been,  first,  to  gather  from  all  sources  and 
then  present  in  compact  form  a  sufficient  body  of  authentic  in- 
formation regarding  all  aspects  of  the  trust  problem  to  furnish 
the  basis  for  intelligent  opinions  and  conclusions,  and,  second, 
to  supply  opportunely  a  public  forum  where  each  side  in  a 
great  debate  may  be  heard  at  its  best  and  usually  in  the  words 
of  its  ablest  exponents  and  advocates. 

There  was  a  choice  of  two  ways  for  presenting  a  summary 
of  the  argument  on  either  side.  One  would  have  taken  the  usual 
form  of  a  colorless  and  balanced  memorandum,  satisfactory  per- 
haps to  students,  but  dry  and  ill-adapted  to  the  general  public,  for 
*whom  the  book  is  specially  designed.  By  the  other  method, 
which  has  been  employed,  the  editor  has  endeavored  to  present 
for  each  side,  with  something  of  the  realism  of  actual  debate,  the 
strongest  summarized  argument  that  can  be  honestly  framed  out 
of  the  material  furnished  by  all  who  have  publicly  contributed 
anything  of  value  to  the  discussion  or  to  the  literature  of  the 
subject— leaving  each  reader  to  draw  his  own  conclusions.  In. 
other  words,  while  the  book  is  non-partisan,  these  arguments  are 
fairly  bi-partisan.  This  method  also  gave  opportunity  for  put- 
ting a  mass  of  unclaimed  but  valuable  material  through  the 
editorial  crucible  and  bringing  it  out  in  something  like  sym- 
metrical shape.  If  it  shall  seem  that  the  argument  against  the 
trust  is  somewhat  more  strenuous  in  style  than  the  argument 
for  the  trust,  it  will  be  borne  in  mind  that  the  former  speaks 
for  a  multitude  who  feel  that  by  the  trust  system  they  are 
wronged,  ethically  as  well  as  economically — that  it  is  not  merely 
a  matter  of  dollars  and  cents  but  of  fair-play  and  manhood. 

Chicago,  January,  1900. 


OUR   ECONOMIC  REVOLUTION. 


We  are  in  the  midst  of  a  sweeping  change  which 
may  fitly  be  termed  an  Economic  Revolution.  It  sharply 
affects  the  welfare  of  every  man,  woman  and  child  in  the 
Republic  and  promises  to  have  an  even  greater  influence 
on  coming  generations  than  on  ourselves,  for  its  effects 
are  likely  to  be  progressive  and  cumulative.  We  of  the 
present  can  neither  feel  nor  see  the  results  in  their  en- 
tirety. The  change  is  fundamental,  not  superficial  nor 
incidental.  It  involves  not  simply  the  adoption  of  novel 
business  methods,  but  the  substitution  of  a  new  eco- 
nomic principle  in  place  of  that  which  has  regulated 
trade,  industry  and  nearly  every  form  of  human  en- 
deavor, since  history  began.  The  novelty,  suddenness 
and  magnitude  of  this  movement  do  not  necessarily 
argue  for  or  against  its  desirability,  but  they  do  chal- 
lenge and  compel  the  most  prompt  and  thorough 
scrutiny. 

Since  the  beginnings  of  civilization,  and  with  steadily 
increasing  urgency,  competition  in  business  has  been 
a  necessity,  wholesome  though  irksome,  confronting  and 
environing  every  one  engaged  in  the  struggle  for  existence. 
Naturally  in  the  early  history  of  a  race  and  in  new  or 
pioneer  communities,  competition  along  most  lines  is  at 
its  minimum,  because  under  such  conditions  wants  are 
few  and  natural  resources  and  opportunities  abundant 
in  proportion  to  the  sparse  population.  But  even  at  the 
dawn  of  history  Abram  and  Lot  with  their  somewhat 
pugnacious  herdsmen  found  the  grass  supply  insuffi- 
cient for  their  respective  flocks  and  herds  on  the  slopes 

9 


10  TRUSTS  OR  COMPETITION* 

of  Canaan,  so  that  "the  land  was  not  able  to  bear  them 
that  they  might  jdwell  together."  Their  compromise 
agreement  to  separate  and  thereafter  supply  beef  and 
mutton  to  wholly  different  communities,  instead  of  wag- 
ing a  mutually  destructive  competitive  warfare,  was 
sound  political  economy  as  well  as  good  neighborhood. 

The  time  is  not  very  long  past  when  kings'  favorites 
were  often  exempted  from  the  operation  of  this  law  of 
life  through  royal  grants,  called  monopolies,  conferring 
the  exclusive  right  to  carry  on  a  given  business  in  the 
community.  These  special  privileges  did  not  stand  for 
any  economic  principle.  They  did  not  constitute  even 
an  attempt  to  solve  any  problem  or  to  promote  the  com- 
mon welfare.  They  simply  represented,  in  the  passing 
childhood  of  the  race,  the  weakness  of  a  monarch  yield- 
ing to  the  greed  and  importunity  of  a  courtier.  They 
rendered  the  general  burden  heavier  by  so  much  as  the 
favored  few  were  relieved.  Then  followed  swarms  of 
private  monopolies  for  all  conceivable  purposes,  sold  by 
the  crown  or  the  state  at  auction  or  otherwise,  to  in- 
dividuals or  companies  as  a  means  of  raising  needed 
revenue.  This  policy  was  at  times  carried  so  far  that 
monopolies  became  the  rule  and  open  competition  the  ex- 
ception. In  1623  the  Monopolies  Act  was  passed  by  the 
English  Parliament,  abrogating  all  such  grants  and  per- 
manently fixing  the  attitude  of  the  nation  and  of  the 
English-speaking  race  as  anti-monopolistic.  Much  of  the 
odium  then  attaching  to  the  term  monopoly  has  adhered 
to  it  down  to  the  present  day.  Both  in  the  popular  mind 
and  in  the  eye  of  the  law  it  represented  and  still  repre- 
sents the  negation  of  economic  fair  play. 

For  a  long  period  this  reaction  against  special  trade 
privileges  undoubtedly  hampered  and  retarded  indus- 
trial and  commercial  progress  by  prohibiting  all  forms 
of  business  association  which  could  even  theoretically 
restrain  competition  and  thus  threaten  a  return  or  ap- 
proach to  monopoly.  Both  the  courts  and  the  people 


OUR  ECONOMIC  REVOLUTION.  11 

were  morbidly  jealous  of  the  inevitable  tendency  toward 
such  association  of  capital  and  effort,  and  the  common 
law,  largely  built  up  out  of  the  judicial  decisions  of  the 
time,  reflected  and  to  some  extent  or  in  some  sections 
still  reflects,  this  over-conservative  spirit.  It  is  only 
during  the  last  half  of  the  nineteenth  century  both  in 
England  and  the  United  States  that  the  old  bondage 
has  been  thrown  off  and  almost  entire  freedom  of  busi- 
ness association  established.  To-day  in  both  countries, 
and  the  same  is  largely  true  of  Continental  Europe,  any 
number  of  persons,  absolutely  without  limit  from  three 
upward,  may  form  themselves  into  a  corporation  for  al- 
most any  lawful  business  purpose,  frequently  with  no 
limitation  as  to  amount  of  capital,  and  usually  at  slight 
expense  and  by  simple  legal  formalities  under  general 
statutes.  This  new  liberty  and  facility  of  association 
and  combination  of  capital,  skill  and  endeavor  undoubt- 
edly account  largely  for  the  fact  that  in  the  past  fifty 
years  the  commercial  nations  have  made  more  progress 
than  during  the  previous  ten  centuries.  The  new  eco- 
nomics and  statesmanship  recognize  that  within  certain 
broad  lines  it  is  far  better,  both  for  the  individual  and 
for  society,  to  have  this  freedom  of  contract  with  cor- 
responding freedom  of  association  and  combination, 
even  if  microscopic  and  detailed  competition  be  some- 
times thereby  incidentally  restrained,  than  it  would  be  io 
have  absolutely  unrestrained  competition  at  the  sacrifice 
of  that  commercial  and  industrial  freedom. 

Concurrently  with  the  development  and  the  enjoy- 
ment of  this  economic  liberty  has  developed  the  marked 
modern  tendency  toward  large-scale  production  in  the 
interest  of  greater  economy  and  efficiency.  Larger  and 
still  larger  manufacturing  plants  and  proportionately  in- 
creased equipments  of  capital  have  become  the  conspicu- 
ous feature  of  the  industrial  world,  with  competition 
raised  to  a  higher  level,  somewhat  humanized  and  ren- 
dered more  scientific.  From  this  has  come  great  advan- 
tage to  the  community. 


12  TRUSTS  OR  COMPETITION f 

To  the  accuracy  of  the  foregoing  sketch  most  think- 
ing persons  would  agree.  But  here  we  come  to  the  part- 
ing of  the  ways: 

(1)  Intelligent  advocates  of  the  modern  trust  sys- 
tem claim  that  it  is  only  the  natural  and  ultimate  step  in 
that  economic  progress  whose  previous  stages  nearly  all 
have  observed  and  approved ;  it  is  the  normal  outworking 
of  the  principle  and  practice  of  competition;  it  is  itself 
the  ideal  form  of  competition,  giving  to  society  the  fruits 
and  benefits  of  competition  without  its  waste  and  in- 
humanity. 

(2)  Intelligent  opponents  of  the  modern  trust  sys- 
tem contend  that  it  is  unnatural;  a  perversion  of  the 
currents  of  economic  advance;  a  violent  ejectment  or  sus- 
pension of  the  principle  of  competition,  and,  in  propor- 
tion to  its  success  and  prevalence,  a  return  by  another 
road  to  the  odious  reign  of  monopoly.    They  believe  that 
the  trust  system  will  do  one  of  two  things,  either  force 
society  forward  prematurely  to  a  crude  and  possibly  dis- 
astrous system  of  state  ownership,  or  compel  society  in 
self-defense  to  make  a  partial  return  upon  the  road,  by 
renewing  the  application  of  common-law  restraints  to 
the  freedom  of  contract,  association  and  combination. 
They  remind  us  that  civilization  means  liberty  with  law. 
They  hold  that  always  and  everywhere  under  the  new  civ- 
ilization the  law,  both  written  and  unwritten,  which  has 
accompanied  and   conditioned  the  modern  freedom  of 
contract,  association  and  combination  has  said  to  every 
citizen:       Your  industrial  freedom  must  be  exercised 
within  the  lines  of  public  welfare,  which  is  secured  by 
effective  competition ;  you  have  broad  liberty  of  combina- 
tion for  rightful  ends,  you  have  none  for  purposes  in- 
jurious to  society;  you  may  associate  and  combine  to 
compete;  you  shall  not  associate  and  combine  to  monopo- 
lize.    They  insist  that,  whatever  may  be  the  fact  in  Eng- 
land since  the  decision  of  the  Mogul  Steamship  case,  our 
American  jurisprudence,  our  legislation  and  our  uni- 


AT0    ROOM    FOR    THE    PESSIMIST.  13 

form  application  of  the  common  law  unite  with  unbroken 
custom  and  with  public  sentiment  to  uphold  this  view. 

The  line  of  cleavage  is  distinct.  The  issue  is  simple 
when  stripped  of  rubbish,  of  vituperation  and  of  irrele- 
vant debate  about  details  of  responsibility  and  of  reme- 
dies. The  trust  system  is  defended  by  the  statement  of 
this  broad  proposition:  All  are  free  to  compete;  where 
there  is  freedom  to  compete  there  can  be  no  monopoly; 
where  there  is  no  monopoly  there  is  no  occasion  for  com- 
plaint. And  this  answer  is  made :  A  system  of  effective 
competition  is  essential  to  the  public  welfare ;  where  there 
is  freedom  or  power  to  combine  for  the  purpose  of  mo- 
nopoly, effective  competition  is  impossible.  The  trust 
system  consists  of  the  exercise  of  the  power  to  combine 
for  the  purpose  of  monopoly;  to  whatever  extent  it  pre- 
vails or  survives,  effective  competition  is  suppressed. 
The  two  things  are  incompatible;  they  cannot  exist  in 
the  same  field  at  the  same  time. 


But  in  all  this  sharp  conflict  of  ideas  and  of  interests 
there  is  no  standing  room  for  the  pessimist  The  Anglo- 
Saxon  race  never  yet  encountered  an  economic  problem 
which  it  did  not  solve,  and  this  one  of  the  trust  is  to  be 
no  exception, 


14 


TRUSTS  OR  COMPETITION f 


It  is  true  of  all  revolutionary  changes  that  their  results  are- 
neither  so  good  nor  so  bad  as  optimists  and  pessimists  respectively 
predict.  So  in  the  case  of  the  trust  movement  the  outcome  will 
probably  represent  a  medium  between  the  expectations  of  its 
champions  and  the  apprehensions  of  its  opponents. 


WHICH  MOST  NEEDS  "PROTECTION?1 


CHAPTER  I. 
THE  ARGUMENT  FOR  THE  TRUST. 

Free  Competition  a  Failure— Not  a  Permanent  Economic  L/aw— Advan- 
tages of  the  Trust  System— Consumers,  Producers  and  Workmen 
Benefited— Commercial  Panics  Prevented— Organized  Labor  and  Or- 
ganized Capital— Lower  Prices  and  Better  Goods— Enlargement  of 
Foreign  Trade— Trusts  Not  Monopolies— Certain  Criticisms  An- 
swered—Legal Basis  of  the  Trust— The  Unified  Industry  a  Permanent 
Institution. 

The  merits  claimed  for  the  trust  system  by  those 
who  are  prominently  and  responsibly  connected  with  it, 
and  by  those  economists  who  have  only  a  scientific  or 
professional  interest  in  the  theme,  but  who  have  reached 
conclusions  favorable  to  the  new  movement,  can  be 
briefly  and  clearly  stated,  for  they  are  mostly  on  the 
surface  of  things.  In  the  following  summary  of  reasons 
why  the  trust  has  come  and  why  it  ought  to  be  accepted 
as  a  good  and  permanent  thing,  the  Editor  has  aimed 
to  winnow  from  the  copious  literature  of  the  subject,  and 
then  reproduce  in  his  own  words,  every  argument  which, 
because  of  its  character  or  its  source,  is  entitled  to  place. 
Possibly  here  and  there  some  arguments  of  the  future 
have  been  anticipated.  Not  all  of  these  reasons  could 
properly  be  attributed  to,  nor  perhaps  would  all  be  ac- 
cepted by,  any  one  advocate  of  the  new  movement  as  a 
whole. 

I.  Free  Competition  a  Failure  Under  Modern  Con- 
ditions.— In  the  process  of  economic  development  free 
and  unregulated  competition  may  cease  to  be  preserva- 


16  TRUSTS  OR  COMPETITION? 

tive,  and  become  destructive,  of  healthful  business,  and 
thus  of  the  general  welfare.  Competition,  from  being 
the  "life  of  trade"  may  become  the  destroyer  of  all  that 
which  makes  trade  most  valuable  to  the  community. 
Such  a  point  has  been  reached  in  some  lines  of  industry 
in  the  United  States  and  elsewhere.  In  those  industries 
unified  ownership  and  management  can  be  used  to  limit 
or  prevent  actual  competition  without  destroying  the 
competitive  principle,  and  with  benefit  alike  to  con- 
sumers and  to  those  engaged  in  production. 

Except  in  those  pursuits  where  there  is  no  occasion 
for  tense  business  rivalry,  free  competition  is  commercial 
warfare  and  is  accompanied  by  practically  all  the  evils 
of  genuine  war  except  the  actual  killing  and  maiming  of 
men.  And  even  here  the  parallel  is  not  wholly  wanting. 
Every  victory  in  the  competitive  conflict  means  a  defeat 
for  the  other  side,  and  where  defeat  means  bankruptcy 
and  a  broken  spirit,  physical  death  not  only  results  in 
myriads  of  cases,  but  is  often  a  welcome  refuge  from  a 
tempest  of  disaster.  In  competition  the  battle  is  em- 
phatically to  the  strong,  often  regardless  of  whether  the 
strength  be  of  the  noble  or  ignoble  sort.  The  highways 
of  business  are  strown  with  the  wrecks  of  fortunes,  of 
hopes,  of  families,  of  homes  and  of  lives.  Nothing  is 
sacred  when  it  stands  in  the  way  of  the  iron  law  of  the 
survival  of  the  fittest.  Whether  necessarily  or  not,  yet 
with  absolute  certainty,  the  Golden  Eule  goes  out  when 
unbridled  competition  comes  in.  Even  John  Stuart  Mill, 
the  unbending  apostle  of  the  Let  Alone  theory,  leaves 
the  beaten  road  of  economic  discussion  long  enough  to 
paint  a  lurid  and  truthful  picture  of  the  evils  of  the 
unending  competitive  battle — evils  for  which  he  could 
suggest  only  the  slightest  alleviation. 

And  this  warfare  has  grown  more  severe  and  more 
destructive  of  wealth,  of  happiness  and  of  life  with  the 
advance  of  civilization.  With  the  ever-progressive  in- 
vention and  application  of  novel  methods  and  machinery, 


FREE    COMPETITION    A    FAILURE.  17 

larger  and  larger  plants  and  greater  and  greater  capital 
have  become  necessary  in  the  manufacturing  industries. 
Year  by  year  it  has  been  found  that  the  smaller  estab- 
lishments cannot  successfully  compete  with  the  larger 
ones.  The  latter  by  mere  reason  of  greater  capacity  and 
output  can  accomplish  economies  which  alone  equal  a 
fair  profit  and  which  leave  the  smaller  competitors  out 
of  the  race.  Hence  the  necessity  for  the  smaller  to  en- 
large by  consolidation  and  adopt  the  best  modern  meth- 
ods or  go  to  the  wall.  And  this  process  goes  on  in  an 
ever  ascending  scale.  The  factories  which  yesterday 
were  largest  and  led  the  trade  are  to-day  distanced  by 
new  concerns  of  still  greater  proportions  and  capital, 
capable  of  introducing  still  greater  economies  and  cut- 
ting cost  of  production  to  still  lower  figures.  The  in- 
dustrial giants  of  ten  years  ago  have  been  dwarfed  by 
the  greater  giants  of  the  present,  and  they  must  them- 
selves enlarge,  consolidate  with  each  other,  or  sink  in- 
vestment and  go  out  of  business  through  the  gateway 
of  insolvency.  Obviously  all  this  could  have  but  one 
ending,  and  it  has  come  in  the  form  of  a  massing  of  all 
important  competitors  in  a  single  corporation,  with  a 
general  truce  to  warfare.  The  individual  manufacturer 
in  an  unorganized  industry  where  competition  is  keen, 
often  finds  himself  between  the  upper  and  nether  mill- 
stone— the  labor-union  forcing  wages  up,  without  regard 
to  profits  of  the  business,  and  bull-headed  competition 
among  manufacturers,  usually  approved  by  an  ill-in- 
formed public  sentiment,  forcing  prices  down.  Between 
these  two  opposite  and  converging  forces  the  manufac- 
turer stands,  like  the  fabled  prisoner,  the  walls  of  whose 
cell  slowly  but  steadily  moved  inward  upon  their  waiting 
and  uncomfortable  victim.  From  such  a  predicament  it 
is  not  strange  that  the  proposal  to  join  a  trust  should 
prove  a  welcome  escape. 

Waste  Through  Competition. — While  the  main  ele- 
ments of  waste  through  competition  are  set  forth  else- 


18  TRUSTS  OR  COMPETITION? 

where  in  this  argument  under  the  sub-title,  "Reduction 
in  Cost  of  Producing,"  etc.,  reference  to  one  aspect  of 
this  fact  is  in  place  here.  Under  free  competition,  when 
failure  is  threatened  to  a  defeated  competitor,  the  in- 
vested capital  cannot  be  withdrawn  and  applied  else- 
where. A  modern  manufacturing  plant  is  almost  ab- 
solutely worthless  for  any  purpose  except  the  special  one 
for  which  it  was  built  and  equipped.  If  it  cannot  be  run 
at  a  profit  in  that  specialty,  it  ceases  to  be  an  asset  and 
becomes  junk.  The  investment  is  a  total  loss.  Hence 
the  tenacity  with  wThich  beaten  manufacturers  cling  to 
a  lost  cause,  hoping  against  hope,  continuing  a  battle 
that  has  already  gone  against  them,  struggling  with  in- 
creased desperation  the  nearer  the  final  catastrophe. 
The  waste  of  wealth  due  to  unrestrained  competition 
would,  if  saved,  go  far  to  enrich  the  community  every 
year.  And  this  waste  finally  falls  for  the  most  part  on 
the  general  body  of  consumers — the  much  enduring  pub- 
lic. Disaster  to  any  industry  usually  means  misfortune 
to  society,  and  conversely  the  steady  prosperity  of  the 
manufacturing  industries  of  a  people  is  both  the  index 
and  a  leading  cause  of  good  times  for  all  classes. 

Free  competition  is  not  a  permanent  and  universal 
economic  law,  as  gravitation  is  a  permanent  and  uni- 
versal physical  law.  Old-time  economists  so  regarded  it, 
as  the  ancients  believed  the  sun  moved  round  the  earth, 
but  in  both  respects  the  world  is  wiser  at  the  dawning 
of  the  20th  century.  Absolutely  free  competition  is  de- 
sirable wherever  and  whenever  it  will  produce  results 
which  are  better  than  those  that  any  other  policy  would 
produce.  At  other  times  and  under  other  conditions  it 
should  and  does  give  place,  first  to  restraint  and  regu- 
lation and  then  by  mutual  agreement  among  competi- 
tors, if  need  be,  to  varying  forms  and  degrees  of  mo- 
nopoly. Natural  monopolies,  or  monopolies  of  situation, 
are  familiar  to  all  and  complained  of  by  few — street  rail- 
ways, gas  and  water  works,  telegraph,  telephone,  etc. 


ECONOMY    OF    LARGE-SCALE    PRODUCTION.  19 

Now  comes,  through  the  orderly  evolution  of  economic 
forces,  an  additional  form  of  so-called  monopoly,  under 
which  several  competitive  establishments,  asking  no 
special  privileges  from  any  source,  are  merged  into  one 
corporation  or  concern  under  a  single  ownership  and 
management,  and  for  the  frankly  avowed  purpose  of 
getting  the  maximum  of  advantage  from  the  largest 
possible  aggregation  of  capital,  talent  and  influence;  ad- 
justing supply  to  demand,  and  of  eliminating  competition 
as  completely  as  practicable,  thus  assuring  continuous 
prosperity  to  the  consolidated  industry,  satisfactory 
profits  and  dividends  to  its  allied  owners,  and  incidental 
but  inevitable  benefit  to  employes  and  the  general  public. 
II.  Reduction  of  Cost  of  Producing  and  Marketing 
Commodities. — The  magnitude  of  this  economy  in  pro- 
duction and  distribution  under  the  trust  system  of  as- 
sociated capital  with  competent  management,  is  scarcely 
realized  by  the  general  public.  Thus:  (1)  The  unified 
industry  will  presumably  be  directed  by  the  ablest  men 
previously  identified  with  its  several  units,  and  this  fact 
is  the  main  guaranty  of  success  for  the  new  organization. 
It  is  safe  to  assume  that  sentiment  and  favoritism  will 
seldom  have  influence  in  selecting  managers  and  high- 
class  employes  from  the  assortment  of  trained  talent  at 
the  disposal  of  each  trust.  A  purpose  to  secure  the 
greatest  possible  efficiency  of  organization  and  direction 
will  govern,  except  in  those  ill-born  combinations  which 
the  folly  of  their  projectors  has  doomed  to  short  and 
malodorous  careers.  (2)  Each  manufacturing  plant  will 
be  utilized  for  producing  only  the  kind  and  grade  of 
goods  for  which,  by  its  capacity,  equipment  and  location 
it  is  best  adapted.  It  is  a  leading  weakness  of  the  com- 
petitive system  that  in  many  industries  each  separate 
company  feels  bound  to  manufacture  several  grades  of 
goods,  and  then  to  market  them  throughout  the  entire 
country.  (3)  The  business  and  mechanical  methods,  in- 
cluding patented  features,  of  the  most  modern  and  sue- 


20  TRUSTS  OR  COMPETITION* 

cessful  establishments  will  be  applied  to  all.  (4)  Raw 
material,  being  purchased  on  the  largest  possible  scale 
by  the  most  expert  buyers  and  by  a  concern  having  ample 
capital  and  high  credit  will  be  obtained  at  lowest  possible 
prices,  of  better  uniform  quality  and  with  assurance  of 
timely  supply.  (5)  There  will  be  little  or  no  temptation 
to  adulteration  of  goods,  or  the  doing  of  inferior  work, 
both  of  which  damage  the  offending  concern  in  the  long 
run,  and  uniform  standards  of  commodities  can  be 
adopted  and  maintained,  to  the  equal  advantage  of  the 
manufacturer  and  the  public.  (6)  The  aggregate  of 
stocks  of  goods  necessarily  kept  on  hand  will  be  greatly 
diminished  with  proportionate  reduction  of  interest, 
storage  charges,  insurance  and  deterioration  from  shop 
wear,  etc.  (7)  Losses  from  bad  credits  will  be  practically 
eliminated  through  the  absence  of  undue  pressure  to  sell, 
and  a  more  thorough  system  of  scrutinizing  the  financial 
condition  of  customers.  (8)  An  enormous  economy  will 
result  from  the  reduction  in  marketing  expenses.  Under 
the  new  system  the  large  item  for  traveling  salesmen  and 
for  various  forms  of  advertising  can  usually  be  reduced 
by  90  per  cent.  Duplicated  and  overlapping  effort  in 
this  wide  field  is  done  away  with.  (9)  Great  saving  re- 
sults from  the  shipping  of  goods  from  the  factory  sit- 
uated nearest  to  the  customer,  instead  of  shipping  from 
a  single  center  to  all  parts  of  the  country.  (10)  The 
best  brain,  energy  and  skill  of  all  the  factories  will  be 
utilized  in  harmonious  and  systematic  work  to  a  com- 
mon profit-producing  end,  instead  of  being  largely 
wasted  and  worse  in  a  campaign  of  mutual  circumven- 
tion, if  not  of  mutual  destruction. 

III.  Advantages  to  Employes. — Reason  and  experi- 
ence lead  to  the  conclusion  that  many  important  bene- 
fits must  accrue  from  the  trust  system  to  the  workmen 
employed  in  the  industries  affected. 

(a)  Steadiness  of  employment  and  certainty  of  pay. 
— It  would  be  a  very  stupidly  managed  corporation  which, 


BENEFIT    TO    WAGE-EARNERS.  21 

having  practical  control  of  an  industry  for  the  whole 
country,  could  not  and  would  not  so  conduct  its  affairs 
as  to  keep  its  various  plants  in  operation  with  a  degree 
of  constancy  not  approachable  under  conditions  of  free 
competition,  and  observation  shows  that  this  is  in  fact 
accomplished.  Every  well-informed  person  knows  that 
the  shutting  down  of  a  plant  even  for  a  short  period 
causes  a  serious  loss  and  manufacturers  avoid  such  a 
step  except  under  compulsion.  Under  trust  methods 
production  can  be  seasonably  regulated  to  suit  probable 
trade  requirements,  instead  of  alternately  glutting  the 
market  with  unneeded  wares  at  unprofitable  competitive 
prices,  and  then  closing  down  factories  and  laying  off 
the  force  to  await  consumption  and  renewed  demand.  If 
improved  methods  and  the  readjustments  made  neces- 
sary by  the  change  to  the  trust  system  tend  at  first  to 
displace  a  small  percentage  of  wage-earners,  this  ten- 
dency is  offset  by  the  increased  demand  for  labor  to 
supply  the  goods  for  new  foreign  markets  opened  by 
these  great  combinations  of  capital  and  aggressive 
energy. 

(b)  Better  Wages. — Starvation  wages  to  artisans  are 
almost  invariably  due  to  low  profits  or  no  profits  for 
proprietors.  Mill  owners  who  are  prospering  fairly  well 
are,  as  a  rule,  glad  to  share  that  prosperity  with  the 
workmen  who  contribute  to  produce  it.  And  this  need 
not  be  mainly  from  humane  motives,  but  simply  because 
it  is  "good  business."  It  is  a  chief  indictment  against 
the  old  system  of  free  competition  that  it  always  and 
everywhere  crowds  down  wages  by  abnormally  crowd- 
ing down  prices  and  profits;  and,  what  is  still  worse, 
that  system  creates  a  sort  of  chronic  "submerged  tenth" 
among  manufacturers  who  are  always  cutting  prices  to 
forces  sales  and  realize  needed  cash,  and  is  ever  driving 
a  certain  percentage  of  employers  into  insolvency  or  en- 
forced retirement  from  business  through  liquidation, 
which  means  in  each  case  throwing  the  factory  hands 


22 

into  idleness  and  their  families  into  distress.  Industrial 
history  proves  that  the  leading  trades  controlled  by 
trusts  have  paid  better  and  steadier  wages  than  most 
others  conducted  under  the  system  of  free  competition. 

(c)  Better  Relations  Between  Labor  and  Capital. — 
Higher  wages  with  steady  employment  will  naturally 
remove  nine-tenths  of  the  usual  causes  of  friction  be- 
tween employer  and  employed.  But  other  influences  are 
at  work  which  make  for  peace  and  a  good  understanding 
under  the  new  system  of  unified  industries.  Jealousies 
and  rivalries  between  competing  companies,  which  often 
spread  to  the  men  of  each  concern,  are  done  away. 
Substantially  all  who  work  in  a  given  line  are  under 
one  employer,  and  will  naturally  feel  a  sense  of  solid- 
arity, which  is  not  possible  where  several  employers  are 
at  swords-points  with  each  other.  Then  in  case  of  ques- 
tions arising  wrhich  need  adjustment,  committees  of  the 
workingmen  have  but  one  authority  to  confer  with  in- 
stead of  a  dozen  or  fifty,  a  fact  which  tends  to  assure 
prompt  and  reasonable  action.  One  concern  will  not 
be  tempted  to  hire  away  the  best  men  of  another  or  to 
tamper  with  the  loyalty  of  expert  employes.  In  one  great 
and  permanent  organization,  covering  an  entire  industry, 
systems  of  insurance,  profit-sharing,  old  age  pensions, 
and  other  beneficial  aids  for  workingmen  are  possible 
and  probable,  which  would  be  wholly  impracticable  in 
smaller,  wreaker  and  scattered  establishments. 

As  to  apprentices. — This  vexed  problem  can  be  more 
easily  solved  under  the  new  system  than  under  the  old. 
Uniformity  of  practice  and  requirements  can  be  applied 
which  shall  be  just  to  each  trade  and  fair  to  the  lads  who 
wish  to  enter  the  ranks  of  skilled  labor. 

IV. — Benefits  to  the  Public. — If  it  were  to  be  shown 
that  the  trust,  or  the  system  of  unified  industries,  is 
necessarily  and  on  the  whole  hostile  to  the  public  wel- 
fare, by  that  fact  its  doom  would  be  sealed  and  a  limit 
fixed  to  its  duration.  No  important  economic  movement 


AX    INDUSTRIAL    BALANCE    WHEEL.  23 

can  be  long-lived  which  plainly  runs  counter  to  the  best 
interests  of  mankind.  Prom  this  elemental  fact  springs 
the  assurance  that  even  if  the  worst  fears  of  pessimists 
prove  well-grounded,  our  present  retrograde  industrial 
revolution  will  be  set  aside  like  any  other  spurious  re- 
form and  the  normal  order  restored.  But  following  are 
the  reasons  urged  by  advocates  of  the  new  departure  for 
believing  that  it  wrill  bring  to  the  masses  of  the  people, 
as  they  say  it  clearly  does  to  the  manufacturers  and 
their  workmen,  advantage  and  not  injury: 

1.  Banishment  of  War  Methods. — If  the  evils  of  un- 
restrained competitive  warfare  heretofore  outlined  ap- 
proach in  magnitude  the  estimate  given   even  by  the 
stoutest  defenders  of    that   system,   and   if    the  trust 
movement  will  materially  modify  those  evils  without 
generating  greater  ones,  then,  to  that  extent,  it  stands 
justified  as  a  change  beneficial  to  society  at  large.     To 
whatever  extent  industrial    and    commercial    peace  is 
made  to  supplant  industrial  and  commercial  war,  good 
and  not  evil  is  done.     The  accusers  of  the  trust  system 
concede  that  it  does  bring,  coextensively  with  its  scope, 
mitigation  and  often  termination  of  competitive  strife; 
but  they  charge  that  it  produces  countervailing  wrongs 
which  leave  as  a  net  result  general  injury  and  not  ben- 
efit.    This  is  denied,  and  will  be  considered  further  on. 

2.  A  Needed  Industrial  Balance  Wheel. — Besides 
harmonizing    by  unifying  a  given  industry,  the    trust 
system,  in  proportion  to  its  adoption  and  prevalence, 
provides  a  regulating  and  steadying  force  in  the  busi- 
ness life  of  the  country  which  nothing  else,  not  even  the 
banking  system,  has  been  able  to  furnish,  and  which  has 
incalculable  value.     Without  its  balance-wheel  and  gov- 
ernor the  steam  engine  would  tend  to  run  away  with 
itself  and  produce  disaster.    The  industrial  community 
under  the  reign  of  free  competition  is  an  engine  without 
any  regulating  element.     In  prosperous  times  or  periods 
of  active  demand  manufacturing  establishments  multi- 


24  TRUSTS  OR  COMPETITION? 

ply,  built  on  the  hopes  and  overconfidence  of  sanguine 
and  often  inexperienced  men;  producing  capacity  is  in- 
creased absurdly  beyond  any  possible  average  consump- 
tion; then  comes  the  inevitable  glut  and  depression;  the 
aggregate  demand  is  not  sufficient  to  keep  one-half  the 
plants  running,  yet  each  holds  out  as  long  as  possible 
rather  than  face  the  loss  of  closing  down,  thus  aggra- 
vating by  still  further  overproduction  a  trade  condition 
already  dangerous.  The  end  comes  in  unprofitable 
prices,  starvation  wages,  then  failures  of  the  weaker 
concerns,  stress  and  strain  for  the  stronger  ones,  loss 
of  employment  for  workmen  and  extinguishment  of  their 
purchasing  power,  and  last,  if  other  conditions  favor  a 
crisis,  the  industrial  breakdown  sets  the  pace,  gives  the 
signal,  and  the  community  finds  itself  in  the  midst  of 
that  periodic  insanity — a  financial  panic,  with  its  terror 
and  widespread  ruin.  This,  in  substance,  is  the  undulat- 
ing history  of  nearly  every  manufacturing  community, 
though,  of  course,  the  circumstances  infinitely  vary  and 
a  dozen  minor  causes  may  contribute  to  the  untoward 
result. 

Here  comes  the  new  force — association,  combina- 
tion, consolidation,  the  trust.  Assuming  that  it  is  suc- 
cessful, it  removes  by  the  very  logic  of  its  existence 
most  of  the  temptation  to  this  industrial  expansion  and 
ballooning  in  times  of  general  prosperity,  and  thereby 
equally  removes,  within  its  sphere,  the  possibility  of  en- 
suing collapse  and  commercial  catastrophe.  The  saga- 
cious and  cool-headed  managers  of  the  unified  industry 
see  to  it  that,  while  manufacturing  capacity  is  kept  fully 
equal  to  maximum  demand,  it  does  not  foolishly  outrun 
it.  They  have  no  temptation  to  permit  serious  over- 
production, with  consequent  cessation  of  profits.  They 
make  very  sure  that  their  particular  industry  prospers 
with  the  general  prosperity,  and  when  the  ebb-tide  sets 
in  they  are  in  position  to  adjust  their  affairs  to  the 
change  without  shock,  without  friction,  without  hard- 


LOWER   PRICES   AND    BETTER    GOODS.  25 

ship  to  employes,  without  loss  of  solvency,  and  hence 
without  contributing  to  panic  conditions  and  possibili- 
ties. A  great  industry  so  organized  and  so  conducted, 
with  its  business  interests,  connections  and  influence 
ramifying  throughout  the  country,  is  surely  a  conserva- 
tive and  preservative  power.  This  steadying  force,  this 
element  of  general  commercial  safety,  can  be  made  to 
render  a  service  to  society,  in  the  prevention  of  panics, 
which  alone  will  compensate  for  any  apparent  or  minor 
drawbacks  of  the  trust  system. 

3.  Lower  Prices  and  Better  Goods. — Under  the 
head  of  "Reduction  of  cost  of  manufacturing  and  mar- 
keting commodities,"  we  have  already  named  several 
elements  of  benefit  to  the  general  public,  such  as  better 
protection  against  unsanitary  practices  and  adulteration 
of  goods,  greater  facility  in  otherwise  exercising  the 
police  powers  of  the  state  over  industrial  methods  and 
establishments.  But,  unless  the  trust  system  is  to  prove 
a  failure,  the  fundamental  advantage  which  it  is  to  con: 
fer  upon  the  public  must  be  the  furnishing  of  better 
goods  at  lower  prices  than  the  system  of.  competitive 
war  would  supply.  This  is  the  theoretical,  the  logical 
and  it  must  be  the  actual  outcome  or  the  trust  has  no 
sufficient  excuse  for  being.  Its  advocates  contend  that 
up  to  date  every  well-matured  trust  has  accomplished 
this  result,  and  the  doubter  is  pointed,  for  examples,  to 
the  price  and  quality  of  our  common  illuminant,  kerosene 
oil,  under  the  Standard  Oil  Trust,  as  compared  with  the 
prices  and  quality  prior  to  the  existence  of  the  present 
practical  monopoly ;  the  same  as  to  the  price  and  quality 
of  sugar  since  the  arrival  of  the  Sugar  Trust. 

Where  apparent  exceptions  to  this  rule  occur  they 
will  be  found  to  be  due  to  one  of  three  causes,  no  one 
of  which  is  necessarily  a  reflection  upon,  or  an  argument 
against,  the  typical  or  ideal  trust:  A  rise  in  price  of  a 
commodity  following  the  formation  of  a  trust  is  usually 
due  (a)  to  the  fact  that  such  formation  followed  a  period 


Z6  TRUSTS  OR  COMPETITION? 

of  competitive  depression  and  unprofitable  prices,  mak- 
ing a  reasonable  rise  to  a  profit-producing  level  justifia- 
ble; (b)  to  the  fact  that  the  organization  was  coincident 
in  time  with  a  general  business  "boom,"  with  increased 
demand  and  advancing  prices  in  all  lines,  as  in  1899; 
(c)  or  to  the  fact  that  the  particular  trust  is  for  the 
time  being  in  the  hands  of  unwise  managers  who  fool- 
ishly assume  that  control  of  a  practical  monopoly  gives 
license  to  "get  all  you  can  from  the  public."  Such  man- 
agers will  learn  better  some  day  or  they  will  land  their 
business  in  a  bog. 

The  only  legitimate  and  sufficient  reasons  for  chang- 
ing over  an  industry  from  the  system  of  free  competition 
to  the  consolidation  plan  are,  (1)  that  peace  is  better  than 
war  and  (2)  that  out  of  the  resulting  economies  and  other 
advantages  of  the  trust-method  there  is  created  a  fund 
which  can  be  and  will  be  used  to  give  owners  better  and 
more  regular  profits,  workmen  higher  and  steadier  wages, 
and  consumers  better  goods  at  lower  prices. 

4.  Enlargement  of  Our  Foreign  Trade. — The  sever- 
est critic  of  the  trust  system  must  admit  that  the  re- 
cent phenomenal  growth  of  our  trade  with  foreign 
nations  has  been  singularly  coincident  with  the  move- 
ment for  consolidating  or  unifying  our  great  industries. 
A  careful  analysis  of  that  growth  shows  that  it  is  not 
mere  coincidence,  but  that  the  two  events  bear  the  rela- 
tion of  cause  and  effect,  so  far  as  that  trade  expansion 
affects  manufactured  products.  Nothing  but  the  vast 
aggregation  of  capital,  knowledge  and  experience  known 
as  the  trust  could  have  accomplished  such  startling  and 
gratifying  results.  Warring  and  relatively  weak  manu- 
facturers, jealous  of  each  other  and  largely  ignorant  of 
foreign  trade  conditions  and  requirements,  could  never 
have  met  and  vanquished  foreign  competition  and  in- 
vaded foreign  markets  as  our  great  modern  corporations 
have  done  and  can  evidently  continue  to  do  with  increas- 
ing efficiency.  The  value  to  our  whole  country  of  this 


WIDE    DISTRIBUTION    OF     OWNERSHIP.  27 

enlargement  of  our  trade  which  is  only  a  promise  of 
greater  things  along  the  same  line,  can  scarcely  be  esti- 
mated. Our  producing  capacity  is  at  least  double  our 
own  people's  consumption.  An  outlet  was  absolutely 
necessary  for  our  surplus,  and  that  outlet  has  been  pro- 
vided largely  by  the  much  criticised  trusts. 

5.  Opportunities  for  Investment. — One  of  the  great- 
est benefits  that  can  be  conferred  upon  society  is  to  fur- 
nish to  all  classes  a  continuing  opportunity  for  investing 
savings  or  other  surplus  capital  in  a  manner  that  shall  be 
reasonably  safe  and  reasonably  remunerative.  The  re- 
cent scarcity  of  such  opportunities  has  been  keenly  felt 
by  multitudes  of  people  whose  dependence  is  wholly  or 
partly  on  the  income  from  invested  funds.  These  include 
thousands  whose  sex,  age  or  physical  condition  prevents 
their  engaging  in  bread-winning  pursuits.  To  these  in 
common  with  the  general  public  the  unification  and  cap- 
italization of  industries  now  progressing  furnish  a  form 
of  investment  at  once  convenient  and  satisfactory.  If 
half  that  is  said  against  the  purposes  of  the  trusts  is 
true  their  net  earnings  are  pretty  sure  to  be  sufficient  to 
make  the  securities  issued  by  them  both  safe  and  profita- 
ble, and  this  in  spite  of  those  occasional  consolidations 
which  are  unwisely  or  dishonestly  launched  or  managed. 
"Industrials"  are  already  a  widely  popular  form  of  in- 
vestment. 

Another  aspect  of  this  same  matter  of  investments 
is  almost  equally  salutary  and  important,  namely,  the 
wide  distribution  of  these  securities,  and  hence  of  owner- 
ship in  the  trusts  throughout  this  country.  It  is  the 
greatest  possible  mistake  to  suppose  that  the  bulk  of 
the  stock  and  bonds  of  these  great  industrial  organiza- 
tions are  locked  up  in  the  vaults  of  the  rich.  Doubtless 
men  of  wealth  and  great  moneyed  institutions  avail 
themselves  of  the  opportunity  to  get  their  share  of  what 
they  believe  to  be  a  good  thing,  but  a  far  greater  propor- 
tion is  passing  into  the  hands  of  the  thrifty  middle  class 


28 

throughout  the  country,  in  amounts  graduated  to  the 
requirements  of  persons  of  small  or  moderate  means. 
The  conservative  effect  of  such  a  condition  of  things  is 
readily  recognized. 

6.  Advantage  to  Owners. — It  is  not  irrelevant  to  men- 
tion last,  as  an  element  of  benefit  to  the  public,  the  ad- 
vantage which  industrial  consolidation  usually  brings 
to  those  citizens  who  have  been  the  proprietors  of  manu- 
facturing plants  under  the  competitive  system  and  who 
almost  universally  continue  to  be  interested,  at  least,  as 
stockholders,  in  the  resulting  trust,  when  an  industry 
is  consolidated.  These  citizens  are  surely  a  part  of  the 
public,  and  their  legitimate  prosperity  should  not  be  a 
matter  of  indifference,  much  less  of  offense,  to  their  fel- 
low men,  if,  as  is  stoutly  insisted,  that  prosperity  involves 
no  detriment,  but  rather  advantage  to  the  people  at 
large. 

V.  Some  Criticisms  Answered.— Objections  to  the 
trust  method  of  handling  great  industries,  though  for- 
midable in  appearance,  are  reduced  by  analysis  to  those 
mentioned  below,  and  while  some  of  them  are  of  such  a 
nature  that  they  can  be  finally  answered  only  by  a  com- 
prehensive experiment  with  the  new  plan,  they  are  en- 
titled to  attention  here. 

The  Displacement  of  Employes. — The  change  to  the 
new  system  undoubtedly  involves  an  important  read- 
justment of  industrial  forces.  Some  out-of-date  and  un- 
profitable factories  here  and  there  will  certainly  be  dis- 
mantled and  the  work  which  they  have  previously 
done  poorly  and  expensively,  will  thereafter  be  done 
well  and  cheaply  in  the  large,  modern  and  perfectly 
equipped  establishments  owned  by  the  trusts,  or,  when 
required,  new,  favorably  located  factories,  will  be  built 
to  meet  the  demand.  But  the  process  of  weeding  out 
the  "have-beens"  among  factories  is  only  slightly  has- 
tened by  the  coming  of  the  trust.  The  competitive 
struggle  for  existence  with  survival  of  the  fittest  was 


SOME    CRITICISMS    ANSWERED.  29 

everywhere  doing  the  same  work  of  elimination.  Then 
it  must  be  remembered  the  consumption  of  commodities 
will  go  on  and  go  on  increasing  even  more  rapidly  under 
the  trust  system  than  before,  and  at  least  as  many  arti- 
cles or  units  of  production  must  be  turned  out  as  ever. 
There  can  be  no  material  reduction  in  the  number  of 
manual  days'  work  required  in  factories,  except  as  im- 
proved machinery  progressively  displaces  hand-labor — 
and  this  change  is  not  due  to  the  trust.  In  other  words, 
the  trust  movement  will  shift  the  location  of  some  work- 
ingmen;  it  will  temporarily  displace  a  few  others  by 
running  one  factory  on  full  time  the  year  round  in  place 
of  running  two  on  short  time  or  spasmodically,  but  after 
a  brief  period  of  rearrangement  and  allowing  for  steady 
growth  of  demand  for  goods,  the  industrial  change  can- 
not diminish  the  aggregate  demand  for  labor  or  other- 
wise impair  the  condition  of  the  artisan  class. 

The  apprehension  is  expressed  in  some  quarters  that 
under  the  new  system,  which  removes  the  workman  still 
further  from  his  actual  employer,  the  tendency  will  be 
to  make  the  duties  and  position  of  the  factory  employe 
more  perfunctory  and  machine-like,  and  himself  a  fix- 
ture in  his  place  and  vocation,  thus  impairing  his  in- 
dependence, his  interest  in  his  work  and  causing  him 
to  deteriorate  in  manhood  and  mental  alertness.  Solici- 
tude in  this  respect  is  probably  groundless.  In  prac- 
tice the  workmen  will  usually  recognize  absolutely  no 
change  in  their  surroundings  in  the  plant  where  they 
are  employed,  because  of  its  passing  into  the  hands  of 
a  trust.  No  detrimental  effect  upon  employes  has  been 
observed  in  those  trusts  which  have  had  greatest  dura- 
tion and  experience.  A  similar  accusation  was  seriously 
brought  against  the  factory  system  a  generation  ago. 
Of  this  parallel  instance  President  Hadley  of  Yale 
in  his  work,  "Economics"  (1898),  speaking  of  the 
charge,  that  the  factory  system  tends  to  deprive  the 
laborer  of  independence,  and  reduce  him  to  the  position 


30  TRUSTS  OR  COMPETITION? 

of  a  machine  says,  "we  may  safely  deny  that  this  change 
is  causing  an  intellectual  decline  among  the  masses." 

Traveling  Salesmen. — The  discontinuance  of  the 
services  of  many  traveling  salesmen  comes  under  a  dif- 
ferent rule.  It  is  to  be  frankly  admitted  that  this  line 
of  employment,  which  is  so  closely  identified  with  the 
outgoing  competitive  system,  will  be  seriously  interfered 
with  by  the  pending  change,  and  that  many  worthy  and 
able  men  will  need  to  adjust  themselves  anew  to  the 
work  of  life.  As  the  leading  argument  for  the  trust 
is  a  sweeping  economy  in  cost  of  producing  and  market- 
ing commodities,  the  effect  of  this  economic  change  must 
fall  somewhere,  and  the  traveling  salesman  happens  to 
be  the  one  whose  services  become  well-nigh  unnecessary 
under  the  new  way  of  carrying  on  an  industry,  because 
those  services  have  represented  a  part  of  the  waste  of 
the  former  system.  The  case  is  almost  an  exact  parallel 
to  the  effect  produced  upon  a  humbler  class  of  employes 
when  the  introduction  of  modern  machinery  and  the  fac- 
tory system  displaced  hand-labor.  In  both  cases  genuine 
hardship  temporarily  ensues  to  those  directly  affected. 
There  is  friction  and  naturally  indignant  protest  at  the 
displacement,  but  a  great  forward  movement  in  eco- 
nomic development  never  has  been  and  never  can  be 
obstructed  by  personal  considerations  of  this  nature. 
On  the  other  hand,  the  displaced  artisans  of  other  days 
were  surprised  at  the  promptness  with  which  their  serv- 
ices were  again  required  and  absorbed  under  the  won- 
derful impetus  given  to  industry  by  the  revolution  which 
at  first  seemed  so  threatening.  In  1865  nearly  a  million 
and  a  half  of  men  were  suddenly  released  from  four 
years  of  military  service  on  either  side  in  our  civil  war. 
Scarcely  one  had  preserved  any  connection  with  his 
former  calling  or  pursuit.  From  generals  to  privates 
practically  all  of  that  bronzed  host  were  "out  of  a  job." 
Great  suffering  and  grave  disorders  were  predicted  be- 
fore the  veterans  of  North  and  South  could  be  provided 


TRUSTS    NOT   MONOPOLIES.  31 

with  vocations — could  accomplish  this  tremendous  re- 
adjustment of  their  lives.  What  actually  occurred  as- 
tonished even  the  most  optimistic  of  political  econo- 
mists. The  two  armies  melted  away  into  their  respective 
communities;  there  was  no  perceptible  congestion,  little 
friction  or  suffering,  and  by  the  time  the  grass  had 
grown  again  on  naked  earthworks  and  trampled  battle- 
fields, every  able-bodied  soldier  of  the  blue  and  the  gray 
was  busy  in  some  bread-winning  pursuit.  The  typical 
"drummer"  is,  by  the  very  logic  of  his  success  in  that 
vocation,  a  particularly  energetic  and  resourceful  per- 
son. Such  men,  even  in  mature  life,  are  wanted.  New 
doors  will  open. 

To  a  large  extent  the  same  reasoning  applies  to 
those  middlemen,  commission  dealers,  factors  and  small 
independent  proprietors  who  are  displaced  or  crowded 
out  by  the  coming  of  the  new  industrial  system. 

Trusts  Not  Monopolies.— The  final  and  most  seri- 
ous-looking indictment  brought  against  the  trust  is  that  it 
constitutes  a  private  monopoly  and  therefore,  in  the 
words  of  Mr.  Bryan,  is  "indefensible  and  intolerable." 
While  a  beneficial  private  monopoly  can  be  imagined, 
let  it  be  conceded  for  the  present  that  a  virtual  private 
monopoly  of  the  production  and  sale  of  any  commodity 
of  general  use  (such  monopoly  not  being  a  natural  mo- 
nopoly, like  a  street  railway,  nor  one  authorized  by  law 
in  the  public  interest,  like  a  patent  on  an  Invention) 
would  be  contrary  to  public  policy,  unfair  to  consumers 
and  hence  not  permissible.  Then  there  remains  this 
defense  of  the  modern  trust — that  it  is  not  In  any  eco- 
nomic or  reasonable  sense  a  monopoly.  Monopoly  of 
the  sort  here  meant  is  defined  by  the  economists  and  law 
writers  to  be  "such  a  control  of  any  commodity  or  service 
as  enables  the  one  exercising  that  control  to  hold  prices 
higher  than  they  would  be  under  free  competition."  For 
the  most  part  the  so-called  trusts  are  simply  big  corpora- 
tions produced  by  the  imperious  economic  necessity  of 


32  TRUSTS  OR  COMPETITIONf 

*  -. 

greater  concentration  and  aggregation  of  capital  and 
skill  in  given  .lines  of  production.  Competition  has  com- 
pelled combination.  In  such  cases  it  is  a  mere  ques- 
tion of  how  large  a  corporation  may  be  in  capital  and  out- 
put and  not  expose  itself  to  criticism  and  to  the  sup- 
posed odium  of  the  nickname  "trust."  All  great  cor- 
porations of  this  general  class  carry  on  their  business  in 
face  of  more  or  less  actual  competition — and  any  ef- 
fective competition  is  wholjy  incompatible  with  the  idea 
or  the  appellation  of  monopoly.  Obviously  if  they  are 
daily  encountering  effective  competition  they  cannot 
hold  prices  at  an  artificial  or  uneconomic  level. 

Potential  Competition. — Now  consider  those  trusts 
which  result  from  the  consolidation  by  purchase  of  all 
or  nearly  all  the  plants  engaged  in  a  given  industry  in 
the  country,  so  that  they  start  business  without  any  ef- 
fective actual  competition  within  the  United  States. 
In  regard  to  this  class  this  claim  is  made  by  the  cham- 
pions of  the  new  economic  departure;  that  they  are  con- 
stantly exposed  to  that  potential  competition  which  con- 
sists in  the  freedom  of  other  capital  and  skill  to  unite 
and  start  competing  plants  and  businesses;  that  there  is 
always  an  abundance  of  this  capital  and  expert  ability  in 
the  community  outside  of  any  trust,  watching  for  the 
inducement  and  opportunity  to  engage  in  the  industry 
represented  by  the  trust;  that  this  potential  and  ever- 
impending  competition  from  the  outside  is  just  as  effec- 
tive and  complete  a  safeguard  for  the  public  against  un- 
reasonable prices  and  other  abuses  as  would  be  the  pres- 
ence of  actual  competitors  in  the  field;  that  by  this  un- 
sleeping menace  of  renewed  rivalry  the  trust  is  kept 
on  its  good  behavior  and  compelled  to  hold  its  prices 
and  profits  at  a  low  plane  so  as  not  to  furnish  a  temp- 
tation for  this  potential  competition  to  transform  itself 
into  actual  and  active  competition;  and  finally  that  any 
trust  which  fails  to  observe  this  basic  law  of  its  being 
will  sooner  or  later  find  itself  to  be  merely  one  of  sev- 


OVERCAPITALIZATION.  33 

eral  competing  corporations  and  will  thereby  cease  to  be 
a  trust  at  all.  In  other  words,  when  all  are  legally  free 
to  compete,  the  competitive  principle  acts  permanently 
and  effectively  through  potential  competition,  even  in 
the  absence  of  actual  competition.  Monopoly  and  poten- 
tial competition  cannot  characterize  the  same  industry 
at  the  same  time.  Thus  the  trust  system  practically  does 
away  with  the  gravest  evils  of,  competition  without  sus- 
pending or  much  impairing  the  efficiency  of  that  com- 
petitive principle  which  is  undoubtedly  necessary  as  a 
safeguard  to  the  public.  The  trust  has  not  abolished 
competition ;  it  has  raised  it  to  a  higher  level,  carried  it 
to  its  logical  result,  and  its  advocates  now  simply  insist 
that  the  legitimate  fruits  of  past  competitive  strife  shall 
not  be  disowned — that  the  successful  competitor  shall 
be  permitted  to  enjoy  the  reward  of  his  legitimate  com- 
petitive victory. 

Overcapitalization. — The  answer  to  the  complaint 
of  alleged  overcapitalization  of  trusts  is  brief  and  three- 
fold: (1)  Even  if  one  business  is  capitalized  at  $10,000,- 
000  in  "shares  of  $100  each,"  and  another  business  of  the 
same  intrinsic  value  at  $1,000,000  in  similar  shares,  this 
simply  means  that  for  reasons  satisfactory  to  themselves 
the  owners  of  the  business  in  the  former  case  choose  to 
divide  the  evidence  of  ownerhip  into  100,000  parts,  while 
in  the  other  case  the  owners  prefer  to  have  only  10,000 
parts.  An  apple  is  the  same  apple,  whether  divided  into 
quarters  or  into  sixteenths.  The  description  of  the 
shares  as  being  "of  $100  each"  obviously  has  no  effect 
upon  the  real  value  of  either  property  or  upon  the  pro- 
portionate ownership  enjoyed  or  dividends  to  be  received 
by  any  shareholder.  The  holding  of  a  share  of  stock  in 
the  former  case  simply  means  that  the  holder  owns  one,- 
one  hundred  thousandth  part  of  the  corporation,  and  in 
the  latter  case  one-ten  thousandth  part.  The  real  value 
is  in  the  company's  actual  property  and  profit-earning 
capacity.  At  the  outset  in  the  open  market  each  share 


34  TRUSTS  OR  COMPETITION? 

of  the  stock  of  the  ten-million  company  should  evidently 
command  one-tenth  of  the  price  of  a  share  of  the  one- 
million  company.  If  in  actual  business  the  two  com- 
panies retain  their  equality  of  actual  values  and  net 
earnings  the  crucible  of  the  stock  market  will  promptly 
settle  the  matter  of  relative  stock  values.  If  the  shares 
of  the  ten-million  company  sell  at  20,  that  is,  $20  each,  the 
shares  of  the  one-million  company  will  simultaneously  sell 
at  200,  or  |200  each,  quite  regardless  of  the  legend  on  the 
stock  certificates  to  the  effect  that  in  each  case  each 
share  has  a  "par  value"  of  $100.  These  elementary  facts 
are  fully  understood  by  all  persons  who  are  sufficiently 
intelligent  to  buy  or  sell  stocks  at  all.  The  public  is  not 
deceived  unless  it  chooses  to  be.  Besides,  the  fact  is 
that  the  average  and  experienced  investor  does  not  care 
greatly  what  is  the  amount  of  actual  assets  possessed  by 
a  corporation.  He  looks  almost  solely  to  the  record  and 
prospect  for  net  earnings,  the  ability  of  the  company  to 
pay  interest  and  dividends.  He  knows  perfectly  well 
that  the  plants  and  other  assets  of  nine-tenths  of  manu- 
facturing concerns  would  not  in  case  of  suspension  and 
liquidation  sell  for  one-tenth  part  of  the  current  valua- 
tion of  the  going  business.  Earning  power  and  good 
will  are  the  elements  of  chief  value  in  any  such  invest- 
ment. A  well-known  newspaper  is  capitalized  at  $100,- 
000,  that  is,  1,000  shares  of  "$100  each,"  but  the  shares 
sell,  when  any  holder  will  sell  at  all,  at  more  than  $1,000 
each,  making  the  market  value  of  the  property  more  than 
one  million  dollars.  Yet  all  the  tangible  assets  of  the 
company  could  be  duplicated  for  less  than  $100,000. 
(2)  If  such  over-capitalization  exists  in  some  cases  and 
if  in  those  cases  the  managers  of  the  trusts  attempt  to 
earn  sufficient  profits  to  pay  dividends  on  much  fictitious 
capital,  they  will  thereby  invite  competition  from  out- 
siders who  are  content  with  a  fair  return  on  actual  cash 
investment  and  who,  therefore,  having  far  less  fixed 


THE    LEGALITY    OF    TRUSTS.  35 

charges  to  provide  for,  can  undersell  the  trust  in  the 
market. 

The  Legal  Objection. — This  is  not  the  place  to  dis- 
cuss the  legality  of  the  trust,  but  the  claim  in  this  re- 
spect made  by  the  friends  of  the  new  system  may  be 
briefly  stated:  (1)  Where  one  corporation  simply  buys 
and  pays  for  the  manufacturing  plants  and  businesses 
constituting  a  given  industry  in  the  United  States  and 
thereafter  conducts  its  affairs  in  a  lawful  manner  it  is 
difficult  to  see  how  it  can  be  successfully  charged  with 
creating  or  promoting  a  combination  in  restraint  of 
trade.  A  corporation,  being  a  legal  unit,  cannot  com- 
bine or  conspire  with  itself.  (2)  It  is  difficult  to  see  how 
such  purchase  and  resultant  unified  ownership  can  be 
judicially  declared  invalid  without  nullifying  that  free- 
dom of  contract  which  is  impliedly  guaranteed  to  every 
citizen  by  the  federal  constitution.  This  position  is  held 
to  be  impregnable  in  spite  of  some  decisions  by  state  tri- 
bunals, like  that  of  the  Illinois  Supreme  Court  in  the 
Glucose  Case  (1899).  In  due  time  when  a  test  case  has 
reached  the  federal  Supreme  Court  it  is  expected  that 
a  decision  will  be  handed  down  which  will  dissipate  all 
doubt  and  end  all  discussion  concerning  the  legal  basis 
of  the  modern  trust  and  the  legal  safety  of  investments 
therein.  Even  courts  are  bound  to  recognize  accom- 
plished revolutions.  No  tribunal,  however  exalted,  can 
undo  histor}1-  and  cause  things  to  be  as  though  they  had 
not  been.  Our  industries  are  already  merged  in  the 
trust  form  or  system,  and  they  can  no  more  be  put  back 
into  the  former  competitive  system  than  can  the  states 
of  our  Union  be  forced  back  into  the  position  of  colonies 
of  England. 


Finally,  the  trust  is  here.  It  is  not  a  hostile  invasion 
from  without,  but  has  been  evolved  from  our  own  con- 
ditions by  our  own  people.  The  universality  of  the 


36  TRUSTS  OR  COMPETITION? 

movement  proves  it  to  be  natural  and  probably  in- 
evitable. If,  in  fact,  it  is  an  agency  of  great  potency  and 
great  possibilities  for  good,  when  rightly  utilized,  shall 
it  be  so  utilized  or  shall  the  new  system  T>e  wrecked  in 
common  with  the  general  prosperity,  by  a  tempest  of 
popular  passion  born  of  prejudice  and  misinformation? 


A  FURTHER  FAVORABLE  VIEW. 

By  DB.  ALBEBT  SHAW,  Editor  of  the  REVIEW  OP  REYIEWS. 


THE  COMBINATION  OF  CAPITAL. 

If  the  organization  of  labor,  even  to  the  extent  of  the  com- 
plete and  monopolistic  control  of  a  great  many  important  trades, 
is  defensible  and  is  a  part  of  the  natural  and  unavoidable  move- 
ment of  economic  society  in  our  age,  it  may  be  none  the  less  true 
that  the  combination  of  capital  engaged  in  a  given  line  of  in- 
dustry is  also  in  the  main  trend  of  our  economic  development, 
and  therefore  not  to  be  prevented  either  by  denunciation  or  by 
enactments.  Up  to  a  certain  point  the  old-fashioned  competitive 
system  was  not  wasteful,  but,  on  the  contrary,  afforded  a  useful 
regulation  of  production  and  of  price.  The  whole  tendency,  how- 
ever, of  business  progress — especially  in  a  country  like  ours 
where  vastness  of  natural  resources  and  the  rapid  growth  of 
population  promote  the  growth  of  small  businesses  into  enter- 
prises conducted  on  a  large  scale— seemed  to  render  the  competi- 
tive system  inadequate  and  wasteful. 

RAILROAD  AMALGAMATION. 

In  the  case  of  particular  enterprises  protected  by  the  patent 
laws,  for  instance,  the  economies  of  production  on  a  large  scale, 
and  also  of  distribution  freed  from  the  special  expenses  that 
competition  entails,  were  very  readily  apparent.  In  railroad 
management  competition  beyond  a  certain  point  proved  to  be 
costly  for  the  patrons  of  the  roads  as  well  as  disastrous 
for  the  owners.  Consolidation  came  to  be  the  order  of 
the  day,  with  the  result  of  the  evolution  of  a  few  large  systems. 
Under  the  operation  of  these  methods  freight  rates  became  lower 
and  lower,  so  that  the  general  public,  far  from  being  the  victims 


DR.  ALBERT  SSAW  ON  THE  TRUST.       37 

Of  transportation  monopoly,  have  been  its  most  obvious  bene- 
ficiaries. This  remark,  of  course,  is  to  be  taken  with  many 
modifications  when  applied  in  a  specific  way.  Individual  patrons 
of  railroads  have  suffered  wrong  through  favoritism  shown  to- 
ward their  business  rivals.  Particular  communities,  also,  have 
suffered  through  an  arrangement  of  rates  which  favored  the 
upbuilding  of  competing  centers.  The  railroad  systems  of  the 
country  have  by  no  means  been  perfectly  administered  in  this 
new  era  of  consolidation.  Nevertheless  there  are  few  people 
who  would  not  be  ready  to  admit  that  railroad  service  is  much 
cheaper  and  better  now  than  it  ever  was  before  in  the  United 
States,  and  that  it  is  cheaper  and  better  here  than  in  other 
countries. 

ADVANTAGES  OF  UNITED  MANAGEMENT. 

It  would  seem  good  for  everybody  to  have  railroad  trans- 
portation removed  almost  or  quite  wholly  from  the  sphere  of 
competitive  business.  The  public  is  not  benefited  in  the  long  run 
by  raite  wairs  between  great  trunk  lines.  Joint  traffic  agree- 
ments of  a  pooling  nature  may  indeed  be  contrary  to  both 
the  letter  and  the  spirit  of  the  Interstate  Commerce  Act;  but-  the 
actual  maintenance  of  non-competitive  rates  and  a  certain 
amount  of  co-operation  in  the  distribution  of  business,  is  not  only 
better  for  the  holders  of  railroad  shares,  but  it  is  also  better 
for  the  shippers  of  goods  and  the  traveling  public  than  rate-cut- 
ting, secret  rebates,  and  the  administration  of  railroad  systems 
in  a  spirit  of  warfare  against  other  systems.  The  fact  is,  of 
course,  that  the  old-fashioned  competitive  system,  carried  to  a 
logical  extreme,  is  closely  analogous  to  warfare;  and  the  whole 
tendency  of  our  civilization  is  away  from  Ishmaelitish  methods, 
and  is  moving  nobly  and  wholesomely  in  the  direction  of  co- 
operative and  peaceful  methods.  The  worst  about  our  railroad 
system  in  times  past  was  not  the  danger  of  its  drifting  into 
monopoly,  but  the  unnecessary  and  speculative  construction  of 
competing  lines,  the  kindred  evil  of  overcapitalization,  and  the 
mischievous  issues  of  securities  that  represented  neither  actual 
investment  nor  developed  value.  These  methods  were  bad,  of 
course,  for  the  country  at  large;  but  probably  the  worst  sufferers 
from  them  were  not  the  communities  through  which  the  railroads 
passed,  but  the  people  who  were  deluded  into  buying  the  fictitious 
stocks  and  unsafe  bonds. 

PUBLIC  WELFARE  NOT  MENACED. 

For  many  years  the  railroad  systems  of  the  country  have 
been  going  through  the  stage  of  financial  reorganization  as  a 
penalty  for  the  reckless  and  improper  methods  of  the  60s  and  70s. 


38  TRUSTS  OR  COMPETITIONS 

The  clear  tendency  of  the  times  is  to  knit  together  yet  more 
closely  the  whole  texture  of  the  country's  railroad  system.  It 
is  not  at  all  impossible — so  swift  is  the  movement  nowadays  of 
industrial  and  financial  combination— that  all  the  railroad  sys- 
tems of  the  country  might,  in  the  not  very  distant  future,  be 
amalgamated  into  one  great  corporate  whole.  Nor  is  it  to  be 
taken  for  granted  without  careful  thought  and  study  that  such 
a  consummation  would  be  deplorable.  The  legislative  power 
to  regulate  railroad  rates  has  become  established  in  practice  and 
is  firmly  upheld  by  the  decisions  of  the  courts;  and  the  state 
also  possesses  the  power  of  taxation.  It  is  not  easy  to  see,  there- 
fore, how  the  community  can  be  in  danger  of  losing  its  liberties 
through  the  further  reduction  of  the  railroad  network  of  the 
country  to  a  complete  and  unified  system  under  one  harmonious 
control.  Nor  would  it  seem  to  matter  very  much  whether  this 
issue  came  about  through  the  legalization  of  pooling  contracts 
or  through  the  actual  consolidation  of  railroad  properties.  This 
will  seem  a  hard  saying  to  many  readers  holding  the  old  anti- 
monopoly  views. 

PUBLIC  OWNERSHIP  A  SUBSEQUENT  ISSUE. 

It  would  be  so  much  the  easier  for  the  Interstate  Commerce 
Commission  to  secure  uniform,  accurate,  and  intelligible  rail- 
road accounting;  and  with  perfect  publicity  the  rate-making  and 
tax-levying  authority  of  the  state  and  nation  could  exercise  all 
needful  control.  Under  such  conditions,  if  the  time  should  ever 
come  when  public  ownership  and  direct  operation  or  the  railroads 
should  be  deemed  desirable,  the  transfer  could  be  brought  about 
in  a  very  simple  way  on  some  such  plan  as  the  exchange  of 
government  bonds  for  railroad  securities  at  an  agreed  market 
value.  The  thing  to  be  desired  is  the  elimination  from  the  rail- 
road business  of  all  speculative  elements,  so  that  after  expenses 
of  operation  and  maintenance  are  paid,  and  the  managers  and 
employes  receive  fair  salaries  and  wages,  there  should  remain 
just  enough  profits  to  pay  interest  and  dividends  upon  an  honest 
capitalization.  This  process  seems  to  be  working  out  through 
natural  business  laws.  When  it  is  pretty  well  completed  it  will 
be  soon  enough,  in  the  United  States,  to  consider  whether  or 
not  the  state  ownership  of  railroads  is  desirable;  and  when  that 
time  comes  it  may  perhaps  make  no  very  great  difference 
whether  the  government  of  the  country  manages  the  railroads 
directly  or  whether  it  leaves  them  to  be  managed  by  a  private 
monopoly  subject  to  public  control,  regulation,  and  taxation. 

TRANSITIONAL  DISTURBANCES. 

All  great  transitions  in  the  business  world  are  fraught  with 
many  incidental  grievances  and  with  much  temporary  incon- 


RIGHTS  OF  MONOPOLY.  36 

venience.  Thus  most  thoughtful  men  would  hold  it  to  be  utterly 
fallacious  to  take  the  ground  that  it  can  be  harmful  to  the 
community  to  introduce  labor-saving  machinery.  On  the  con- 
trary, it  is  agreed  by  most  sound  thinkers  that  the  invention 
and  use  of  appliances  for  saving  labor  must  inevitably  add 
to  the  general  prosperity,  and  ought,  therefore,  to  be  encouraged 
in  every  possible  direction.  Nevertheless,  at  the  moment  when 
the  labor-saving  device  is  introduced  in  any  given  trade,  there 
results  no  little  hardship  to  many  individuals.  It  is  similarly 
true  in  the  business  world  that  the  growth  of  production  on  a 
large  scale  and  a  rapid  extension  of  the  sphere  of  combination 
has  crowded  many  small  capitalists,  manufacturers  and  traders 
to  the  wall  and  caused  no  little  loss  and  confusion.  This,  how- 
ever, involves  no  new  principle.  Competition  has  never  at  any 
stage  been  a  merciful  or  considerate  system  of  business  organiza- 
tion; and  it  is  by  the  methods  of  competition  that  the  modern 
combination  crushes  out  those  who  do  not  co-operate  with  it. 

The  new  combination  popularly  called  a  "trust"  is  ruthless 
in  its  opposition  to  surviving  or  incipient  competitors,  but  its 
methods  in  the  main  are  not  very  different  from  those  that  a 
powerful  business  man  fifty  years  ago  would  have  used  to 
break  down  his  weaker  rivals.  These  methods  aire  not  admira- 
ble, but  it  is  well  to  remember  that  they  belong  not  to  the 
new  system  of  co-operative  capital,  but  to  the  old  competitive 
system  that  the  new  methods  are  proposing  to  supersede. 

THE  RIGHTS  OF  MONOPOLY. 

The  method  that  came  to  be  substituted  [for  the  trust  proper] 
was  that  of  selling  the  properties  outright  to  a  new  corporation. 
Property  rights  are  secure  under  our  national  and  state  consti- 
tutions, and  one  of  the  most  vital  of  property  rights  is  the  right 
to  sell  what  one  possesses.  If  a  corporation  may  be  formed  for 
the  purpose  of  one  sugar  refinery,  it  will  in  practice  be  diflBcult, 
if  not  impossible,  to  prevent  its  purchasing  or  building  other 
sugar  refineries;  and  there  would  seem  no  constitutional  method 
by  which  its  progress  might  not  result  in  a  monopoly.  Such 
monopolies  might,  of  course,  pursue  measures  which  would  be 
harmful  to  the  community  and  against  which  laws  could  prop- 
erly be  made.  The  devices  of  public  regulation  and  taxation 
could  always  be  brought  to  bear;  but  against  the  mere  fact 
of  monopoly  per  se  there  would  seem  to  be  no  successful  form 
of  legal  opposition.  The  government  Patent  Office  every  day 
grants  control  over  certain  inventions  with  the  avowed  object 
of  promoting  for  a  term  of  years  strict  monopoly.  If,  in  some 
field  of  industry  not  dependent  upon  the  protection  of  the  patent 
laws,  a  monopoly  should  arise  by  reason  of  the  fact  that  a 


40  TRUSTS  OR  COMPETITION* 

single  individual  or  firm  or  corporation  had  come  into  control 
of  the  entire  production  of  a  given  article,  it  would  not  follow 
necessarily  that  there  was  any  greater  impropriety  in  this  par- 
ticular monopoly  than  in  those  especially  fostered  by  the  govern- 
ment under  its  patent  laws. 

FREEDOM  WITH  REGULATION. 

In  a  free  country  there  must  be  freedom  to  combine  and  to 
co-operate  just  as  there  must  be  freedom  to  compete.  On  the 
other  hand,  the  regulation  and  control  of  monopoly  is  permissible 
and  necessairy,  just  as  the  regulation  of  competition  at  certain 
points  has  been  found  desirable.  Thus  in  the  field  of  competition 
the  laws  now  protect  the  good  employer  from  the  unfair  com- 
petition of  bad  employers  by  regulating  the  character  of  fac- 
tories, the  time  conditions  under  which  women  and  children  are 
employed,  and  in  various  other  ways.  The  tendency  now  shown 
in  a  number  of  our  state  legislatures  to  enact  laws  striking 
directly  at  the  formation  of  monopolies  is  readily  explained, 
but  does  not  indicate  very  mature  consideration.  A,  who  is  a 
grocer  in  the  town  of  B,  would  naturally  be  glad  to  be  the 
only  grocer  in,  the  town;  and  if  he  could  form  a  partnership 
with  C  and  D,  his  principal  competitors,  and  the  new  firm  could 
then  buy  out  or  crowd  out  their  smaller  competitors,  there  would 
emerge  a  monopoly.  The  methods  used  in  obtaining  that 
monopoly  might  not  have  been  very  kindly  or  polite,  but  they 
might,  nevertheless,  have  been  strictly  within  the  pale  of  the 
law;  and  it  is  conceivable  that  the  monopoly  might  be  main- 
tained indefinitely  through  the  economical  and  careful  conduct 
of  the  business  and  through  the  policy  of  sharing  with  customers 
the  benefits  derived  from  doing  business  on  a  large  scale. 

MAGNITUDE  OF  THE  MONOPOLY  MOVEMENT. 

This  illustration  of  the  grocery  store  applies  well  enough 
to  most  of  the  monopolies  that  pass  nowadays  under  the  title  of 
"trusts."  It  does  not  follow,  however,  because  the  principle  of 
amalgamation  is  the  simple  one  of  bringing  rival  properties 
under  a  common  ownership,  that  the  movement  Is  any  the  less 
stupendous  in  its  volume  or  revolutionary  in  its  consequences. 
It  is  entitled  to  all  the  attention  that  is  being  drawn  to  it,  and 
to  a  'great  deal  more.  It  would  be  strange,  indeed,  if  a  move- 
ment that  is  changing  the  whole  face  of  the  business  world 
should  not  be  reflected  in  any  manner  in  political  and  legislative 
discussion.  At  the  present  stage  the  public  needs  information; 
and  the  things  to  encourage  are  study  and  inquiry,  rather  than 
the  attitude  of  furious  hostility.  The  laws  that  have  been 
enacted  with  the  intention  of  checking  the  aggregation  of  capital 


1'RVSTS  AND  GREAT  FORTUNES.  41 

have  certainly  had  no  decisive  effect  of  that  sort.  The  opposi- 
tion to  the  old  form  of  trust  has  simply  'Stimulated  the  forma- 
tion of  those  more  complete  aggregations  that  involve  the 
bona  fide  transfer  of  the  property  to  a  new  company  that  thus 
absorbs  the  old  corporations. 

COHESIVE  POWER  OF  THE  "TRUSTS." 

The  Cordage  Trust  was  one  of  the  earlier  combinations  which 
went  to  pieces  a  time  or  two,  and  which  gave  the  public  the 
impression  that  the  combination  movement  in  itself  was  con- 
trary to  natural  -economic  tendencies  and  might  therefore  be 
thwarted.  But  if  the  Rope  Trust  indeed  was  held  together  by 
ropes  of  sand,  it  was  a  marked  exception.  The  industrial' 
monopolies,  for  the  most  part,  show  signs  of  great  stability. 
It  is  likely  enough,  of  course,  that  where  they  have  been  reck- 
lessly and  foolishly  overcapitalized— with  the  idea  that  monopoly 
means  the  opportunity  to  advance  prices  and  oppress  the  public— 
they  will  come  to  financial  grief  and  be  compelled  to  reorganize. 
But  reorganization  in  such  cases  means  nothing  very  different 
from  railroad  reorganization.  Where  a  railroad  has  gone  into 
the  hands  of  a  receiver,  the  trains  continue  to  run  and  the 
shippers  and  passengers  see  no  difference.  The  reorganization 
is  a  matter  of  finance.  A  great  number  of  so-called  trusts  have 
been  floated  upon  absurd  overissues  of  preferred  and  common 
stock,  and  the  "water"  will  sooner  or  later  have  to  be  squeezed 
out.  It  does  not  follow,  however,  that  the  combination  will 
dissolve  into  its  original  elements',  and  that  its  parts  will  go 
back  to  the  old  system  of  competing  with  one  another  as  inde- 
pendent concerns.  The  probability,  on  the  contrary,  is  that  the 
advantages  of  monopoly  production  and  distribution  will  be 
firmly  retained.  It  is  to  be  (regretted  that  the  laws  in  this 
country  are  not  as  rigid  as  those  of  some  foreign  countries  as 
respects  capitalization  of  joint  stock  enterprises.  But  the  trick 
of  overcapitalization,  although  intended  to  aid  in  fleecing  the 
public  by  making  it  pay  prices  that  would  earn  dividends  on 
fictitious  stock,  is  likely  to  react  in  the  end  upon  the  share- 
holders. 

TRUSTS  AND  GREAT  FORTUNES. 

The  period  through  which  we  are  passing,  in  which  the 
competitive  economics  of  large  production  drives  capital  in- 
evitably to  seek  the  security  of  combination,  abounds  in  those 
uncertain  elements  which  give  opportunity  for  the  formation 
of  immense  fortunes,  due  rather  to  abnormal  conditions  than  to 
relative  superiority  in  the  management  of  business  enterprises. 
This  phenomenon  of  the  rapid  growth  of  colossal  fortunes  will 


42  TRUSTS  OR  COMPETITION? 

doubtless  continue  until  the  transition  is  fairly  complete  and 
the  great  industries  settle  down  to  steady-going  methods  under 
strict  public  regulation.  The  tendency  will  then  be  for  labor,  on 
the  one  hand,  and  the  state,  through  taxation,  on  the  other,  to 
absorb  everything  except  a  reasonable  profit  upon  the  capital 
employed  in  the  monopolized  enterprises.  The  speculative  ele- 
ment in  the  so-called  "industrials"  will  have  a  tendency  to  dis- 
appear as  in  the  case  of  the  railroad  systems;  and  it*  may  be 
expected  that  there  will  come  about  a  gradual  diffusion  of 
ownership  in  these  great  enterprises  through  the  investment 
of  the  savings  of  the  people  in  their  stocks  and  securities,  quite 
as  in  France,  where  the  real  owners  of  most  great  undertakings 
are  working  people  and  small  investors.  It  is  altogether  too  soon 
to  say  that  the  tendency  to  the  accumulation  of  great  fortunes 
will  not  be  squa:*ely  offset  by  other  and  even  more  potent  tenden- 
cies. The  next  census,  in  so  far  as  it  may  carry  out  a  special 
inquiry  into  the  wealth  of  the  country,  is  not  likely  to  find  that 
the  past  decade  has  put  an  increased  proportion  of  the  national 
wealth  in  the  hands  of  the  millionaires.  It  has  certainly  pro- 
duced the  phenomenon  of  a  larger  number  of  multi-millionaires. 
But  the  advance  in  general  prosperity  of  more  than  70,000,000 
people  easily  counterbalances  the  abnormal  growth  of  individual 
fortunes. 


Despair  in  presence  of  a  perplexing  economic  situation  is  like 
cowardice  in  the  face  of  the  enemy. 


CHAPTER  II. 
THE  ARGUMENT  AGAINST  THE  TRUST. 

An  Explanatory  Word — No  War  on  Corporations  or  Capital— Large-scale 
Production  Approved— Monopoly  Alone  Attacked— Competition  Not  a 
Failure— Causes  of  the  Trust  System— Method  of  Trust-building— 
The  Men  Behind  the  Trust— Monopoly-hunger,  Not  Evolution— The 
Trust  an  Economic  Impertinence — Concerning  Foreign  Trusts— Some 
Trust  Benefits  Fictitious,  Others  Overstated— Our  Foreign  Trade- 
Effect  of  Trusts  on  Towns,  Farms  and  Labor — The  Door  of  Oppor- 
tunity Shut— Eastward  Movement  of  Industries— Competition,  Actual, 
Potential  and  Spurious— The  Giant  and  His  Club— The  Trust  and 
Socialism— As  to  Trust  Prices. 


At  the  outset  a  simple  definition  is  necessary,  al- 
though it  ought  not  to  be.  Opposition  to  the  trust  system 
is  solely  a  battle  against  monopoly.  Among  thinking 
people  there  is  no  objection  to  the  existence  of  corpora- 
tions, or  even  of  large  corporations,  engaged  in  legitimate 
business  and  using  legitimate  methods.  There  is  no  war 
on  capital  as  such.  There  is  no  disposition  to  resist  or 
complain  of  the  evidently  natural  modern  tendency  to 
carry  on  productive  industries  with  greater  capital  and 
larger  plants  until  the  maximum  of  economic  efficiency 
within  competitive  lines  has  been  reached.  That  which 
alone  has  called  out  the  swift,  indignant  and  well-nigh 
unanimous  protest  of  our  people  is  the  proposition  to 
substitute  systematic  private  monopoly  for  open  compe- 
tition in  many  or  all  of  the  great  industries  of  the  land. 
It  is  monopoly  entrenched  within  particular  corporate 
organizations  and  backed  with  aggregated  capital  that 

43 


44  TRUSTS  OR  COMPETITION? 

the  public  intends  to  reach  and  deal  with.  Corporations 
themselves,  as  a  system  or  institution  of  all  commercial 
communities,  are  safe  from  assault. 

The  studied  and  persistent  attempt  on  the  part 
of  most  defenders  of  the  trust  to  ignore  these  facts,  to 
sidetrack  the  great  discussion  and  dwarf  the  present 
storm  into  a  teapot-tempest  of  ignorant  passion  against 
all  wealth  and  all  corporations,  an  attempt  which  is  illus- 
trated in  a  majority  of  the  pro-trust  arguments,  is  un- 
worthy and  futile.  It  cannot  long  confuse  even  the 
simple,  and  it  cannot  at  all  divert  the  course  of  the  pres- 
ent wide  debate.  To  this  end  we  shall  in  the  present 
argument  usually  characterize  the  object  of  remark  as 
the  Monopoly-trust,  for  there  is  no  other  offender  in 
sight.  Further,  the  monopoly-trusts  under  discussion 
are  not  to  be  confounded  with  natural  monopolies  like 
railroads  whose  charges  and  conduct  are  perfectly  con- 
trollable by  government,  nor  with  temporary  special 
franchises  like  patents  and  copyrights,  which  are 
granted  in  the  public  interest,  to  encourage  invention 
and  literature,  and  which  shut  out  society  from  nothing 

This  claim  that  antagonism  to  the  monopoly-trust  Is  really  a  war 
on  all  corporations  with  their  necessary  aggregations  of  capital  has  no 
other  warrant  than  this:  When  the  courts  found  monopoly  entrenched 
In  the  form  of  organization  properly  called  a  trust  (like  the  original  or- 
ganization of  the  Standard  Oil  and  the  Sugar  Trust)  and  compelled,  a 
hurried  evacuation  of  the  premises,  monopoly  took  refuge  first  in  practi- 
cal corporation-partnership  and  next  in  single  corporate  ownership— the 
guise  in  which  virtually  all  trusts  now  appear,  and  In  which  they  have 
considered  themselves  unassailable.  It  is  not  the  corporation  that  the 
public  antagonizes;  it  is  the  monopoly  housed  in  corporate  form.  It 
may  become  necessary  to  demolish  certain  speciflc  corporations  in  order 
to  reach  their  occupants,  but  this  is  very  far  from  constituting  war  on 
corporations  as  such.  Let  this  illustrate: 

An  invading  army,  having  been  worsted  in  its  first  campaign,  adopted 
the  expedient  of  stationing  its  outposts  in  certain  of  the  schoolhouses  of 
the  vicinity.  Thereupon  the  troops  of  the  invaded  country  trained  their 
artillery  on  these  outposts,  with  the  natural  result.  Then  the  invaders 
shouted,  "Ah,  you  are  making  war  on  the  Schoolhouse,  and  the  culture 
It  represents,"  and  at  once  proceeded  to  occupy  certain  stone  churches 
near  by.  The  patriot  army  was  compelled  to  shell  these  also  in  order  to 
reach  the  enemy,  whereupon  the  invaders  held  up  both  hands  and  with 
marked  sincerity  appealed  to  the  civilized  world  to  witness  that  these 
barbarous  people  were  really  making  war  on  their  own  schoolhouses  and 
churches,  on  education  and  religion. 

He  who  runs  may  read. 


SOME  NEEDED  DEFINITIONS.  45 

which  it  previously  possessed.  Comparisons  of  the  one 
with  the  others  are  fallacious  and  misleading.  The  term 
monopoly  is  herein  emploj'ed  in  its  usual  economic  and 
commercial  sense  of  practical  or  virtual  control  of  an  in- 
dustry or  business.  There  are  no  absolute  or  perfect 
monopolies,  since  even  our  postal  service  is  in  competition 
with  the  express  companies  and  other  common  carriers. 
It  is  universally  admitted,  except  by  special  pleaders,  that 
any  trust  which  owns  or  controls  from  75  to  90  per  cent 
of  an  industry  has  a  virtual  monopoly  of  that  industry 
and  can  do  practically  what  it  will.*  *  *  Throughout 
no  reflection  is  intended  upon  the  personality  of  those 
who  are  identified  with  the  trust  movement.  At  worst, 
most  of  them  have  been  misled  by  a  colossal  opportunity 
for  great  and  sudden  gain.  A  false  principle  and  system 
only  are  under  discussion.  Industrial  corporations,  how- 
ever large  or  successful,  are  not  properly  classed  as 
trusts  if  they  are  not  fairly  chargeable  with  the  intent  or 
the  fact  of  virtually  monopolizing  an  industry. 


For  evident  reasons  the  argument  against  the  trust 
cannot  be  and  need  not  be  so  elaborate  as  the  argument 
in  its  favor.  Instances  occur  in  every  field  of  life  where 
a  score  of  apparently  conclusive  reasons  can  be  given  in 
support  of  a  proposed  change,  all  of  which  are  set  aside 
by  a  single  fundamental  and  overwhelming  reason  on 
the  other  side.  A  home-seeker  may  admit  many  most  at- 
tractive features  in  a  residence  which  he  is  urged  to  buy, 
but  may  offset  them  all  with  the  brief  answer,  "It  is  un- 
sanitary." A  business  man  may  be  convinced  of  many 
profit-producing  elements  in  a  policy  which  he  is  asked  to 
adopt,  yet  reject  them  all  with,  "It  is  not  honest."  On  a 
certain  occasion  when  the  economic  and  other  glories 
of  all  the  kingdoms  of  the  world  were  portrayed  and 
tendered  as  an  inducement,  the  negative  argument  re- 
quired but  four  memorable  words.  One  sufficient  ethical 


46 

reason  tips  the  scale  against  a  cart-load  of  commercial 
advantages. 

Up  to  a  well-defined  point  the  strictly  economic 
argument  in  behalf  of  the  trust  is  strong  and  clear.  Sev- 
eral elements  in  that  argument  are  undoubtedly  sound, 
and,  standing  by  themselves,  are  entitled  to  all  the  con- 
sideration claimed  for  them.  All  this  may  safely  be 
conceded,  for,  after  all  concessions  are  made,  its  oppo- 
nents contend  that  the  trust  system  should  never  have 
been  inaugurated  and  should  now  be  discontinued,  be- 
cause in  its  essence  and  net  results  it  is  both  economi- 
cally and  ethically  hostile  to  human  welfare. 

Obviously  the  burden  of  proving  its  case  lies  with 
the  trust.  Its  arrival  and  existence  among  us  constitute 
a  sharp  challenge  to  the  established  economic  order — a 
sweeping  indictment  of  about  all  that  society  has  been 
accustomed  to  regard  as  settled  and  orthodox  in  the  busi- 
ness arrangements  and  relations  of  civilized  men.  It 
rests  with  the  advocates  of  this  particular  innovation 
and  proposed  revolution  to  justify  their  new  social  and 
industrial  scheme.  They  have  stated  their  case  in  a 
manner  that  has  apparently  convinced  themselves  and 
a  very  intelligent  and  influential  section  of  the  public, 
and  has  mystified  and  bewildered  a  multitude  besides. 
Hitherto  they  have  been  greatly  aided  in  this  by  the 
unfortunate  fact  that  most  of  the  utterances  on  the 
other  side  have  been  largely  emotional  and  denunciatory 
instead  of  being  reasonable  and  forcible — evolving  far 
more  caloric  than  illumination.  One  zealous  antagonist  of 
the  trust,  on  being  remonstrated  with  for  his  constant  use 
of  invective  in  place  of  argument,  unconsciously  justified 
his  critic  by  replying  that  when  a  citizen  wakes  at  night 
to  find  that  a  burglar  has  broken  into  his  home  and 
taken  him  by  the  throat,  the  circumstances  do  not  favor 
a  placid  and  strictly  logical  presentation  of  reasons  why 
the  invader  should  have  pursued  a  different  course.  So, 
the  anti-trust  protest  has  thus  far  been  for  the  most  part 


TEE  ARGUMENT  AGAINST  THE  TRUST.  47 

an  outcry  in  the  dark,  of  mingled  indignation  and  alarm. 
What  then  is  the  argument  against  the  trust? 

I.    COMPETITION  NOT  A  FAILURE. 

Under  the  competitive  system  the  human  race  has 
achieved  its  development,  won  all  its  victories,  accom- 
plished all  its  progress.  That  it  has  done  this  largely  by 
reason  of,  and  not  in  spite  of,  that  system,  mankind  still 
believes.  Competition,  the  struggle  for  existence  and  ex- 
cellence, in  practically  every  domain  of  human  affairs 
has  been  the  schoolmaster  of  the  race.  Under  its  salutary 
severity,  and  often  by  virtue  of  the  very  friction  and 
pain  against  which  men  cry  out,  the  orderly  evolution 
has  advanced  and  its  flower  and  fruit  have  been  reached 
in  that  crowning  result  which  we  call  modern  Civilization 
and  human  Character. 

Doubtless  the  competitive  struggle  has  been  in  many 
places  and  times  needlessly  severe.  Human  folly  has 
often  introduced  competition  where  it  did  not  belong  and 
carried  it  to  destructive  extremes  without  the  slightest 
warrant  of  necessity.  So  the  wholesome  rule  of  gravita- 
tion has  often  been  misapplied  and  untoward  results  have 
been  encountered;  yet  few,  if  any  among  us  have  been 
disposed  to  devise  and  apply  the  opposite  principle  as  a 
new  regulator  of  the  physical  universe!  During  the  last 
two  decades  of  the  closing  century  more  has  been  learned 
concerning  the  proper  limits,  province  and  adjustments 
of  the  law  of  competition  than  during  all  previous  time. 
In  the  light  of  this  new  knowledge  the  world  has  been, 
with  sufficient  rapidity,  rewriting  its  science  of  political 
economy,  chiefly  along  the  line  of  such  a  readjustment  of 
competitive  conditions  and  methods  as  should  make 
them  consonant  with  Christian  common  sense  and  the 
scientific  spirit,  without  sacrificing  the  stimulus,  the 
educational  force,  the  open  door  and  the  public  protec- 
tion which  the  competitive  principle  alone  supplies.  All 
thinking  men  have  increasingly  realized  that  the  civil- 


48  TRU8T8  OR  COMPETITION? 

ized  world  has  entered  upon  a  distinctly  new  phase  of 
social  and  economic  development,  especially  involving 
great  aggregations  of  capital,  labor  and  managerial  skill. 
Association,  co-operation  and  magnitude  in  industrial 
and  commercial  methods  gradually  became  the  rule  along 
many  lines.  To  this  central  fact  of  the  new  period  all 
classes  were  adjusting  themselves,  with  little  of  protest 
or  friction.  That  the  progressive  change  was  an  orderly 
advance  in  response  to  a  natural  law,  few  doubted  who 
thought  clearly.  The  great  benefits  of  the  new  method 
viewed  largely  compensated  for  the  inconvenience  which 
it  brought  to  some.  But — this  fact  stands  out  like  a 
head-land,  the  new  tendency,  while  it  accomplished  and 
promised  great  amelioration  of  the  harshness  of  the  self- 
regarding  struggle  for  existence  and  well-being,  did  not 
attack  or  disturb  the  central  principle  of  effective  com- 
petition— which  the  people  believed  and  still  believe  to 
be  their  enduring  citadel  of  economic  safety. 

Among  the  ultimate  results  of  the  progressive 
change,  systematic  monopoly  in  private  hands  did  not 
appear  on  the  horizon  of  probabilities.  Much  less  did 
it  seem  among  the  possibilities  that  systematic  private 
monopoly  of  the  greatest  industries  of  the  people  could 
or  would,  before  the  beginning  of  the  new  century,  be- 
come an  accomplished  fact,  defended  and  justified  by 
many  citizens  as  the  fruit  of  natural  and  wholesome  busi- 
ness evolution. 

Now,  into  this  hopeful  economic  situation  comes 
the  trust-system,  which  undertakes,  not  to  regulate  and 
methodize  competition  while  leaving  unimpaired  its  con- 
servative vigor,  but  to  suspend  effective  competition  al- 
together in  those  industries  which  it  controls  while  leav- 
ing the  rest  of  the  community  immersed  in  the  old  com- 
petitive conflict,  intensified  by  the  wholesale  desertion 
and  unfair  exemption  of  the  owners  of  the  monopoly 
trusts. 

More    specific   and    concrete    reasons   will   appear 


GENESIS  OF  THE   TRUST  SYSTEM.  49 

further  on  why  the  monopoly-trust,  instead  of  being  a 
cosmic  and  necessary  movement  is,  in  fact,  an  economic 
impertinence. 

II.    CAUSES  AND  GENESIS  OF  THE  TRUST. 

The  causes  and  contributory  conditions  which  have 
brought  in  the  trust  system  are  not  so  complex  nor  so 
occult  as  many  assume.  When  due  allowance  has  been 
made  for  the  several  causative  agencies  herein  named- it 
is  believed  that  not  much  will  remain  unaccounted  for. 

(a)  As  already  conceded  the  undoubted  economic 
tendency  of  recent  years  has  been  toward  capitalistic  as- 
sociation and  co-operation  on  a  large  scale  in  commercial 
and  industrial  enterprise — within  the  lines  of  effective 
competition.  There  is  no  occasion  for  quarreling  with 
those  who  claim  that  this  development  is  as  natural  and 
irresistible  as  was  that  of  the  introduction  of  improved 
machinery  and  the  factory  system.  An  intelligent  and 
fair-minded  public  did  not  fail  to  recognize  that  within 
proper  limits  this  system  has  brought  much  of  benefit  to 
the  people,  and  that  when  the  policy  of  large  manufac- 
turing plants  and  correspondingly  large  equipments  of 
capital  is  adopted  by  one  community,  it  must  be  adopted 
by  others  or  the  latter  will  lose  in  the  competitive  race. 
Accordingly,  we  became  familiar  with  the  gradual  elimi- 
nation of  many  small,  inefficient  and  ill-placed  industrial 
plants  and  the  concentration  of  production  in  a  smaller 
number  of  large,  but  still  competing  concerns — 
many  of  which  thus  reached  in  magnitude  and  capital 
the  maximum  of  efficiency  in  quality  and  cheapness  of 
production.  Witnessing  this  tendency  to  enlargement 
and  the  public  acquiescence  it  enjoyed,  a  few  "captains 
of  industry"  assisted  by  sharp-scented  financiers  behind 
them  received  a  new  revelation.  Impatient  with  that 
wholesome  business  rivalry  through  which  they  had  them- 
selves reached  success,  and  blindly  ignoring  the  fact  that 
between  modified  but  effective  competition  and  indus- 


50  TRUSTS  OR  COMPETITION' 

trial  monopoly  there  is  a  gulf  as  deep  and  wide  as  hu- 
man welfare,  they  evolved  the  proposition  that  this  ac- 
cepted method  of  doing  almost  everything  on  a  large 
scale  could  easily  be  carried  further,  to  what  they  chose 
to  call  its  "logical  conclusion,"  so  that  an  entire  industry 
should  be  controlled,  if  not  owned,  by  one  combination 
or  interest.  Consciously  or  unconsciously  these  imper- 
sonal gentlemen  thus  set  as  the  prize  to  be  sought,  a 
series  of  industrial  monopolies  in  private  hands  wholly 
unrestrained  by  law. 

THE  GERM  OF  THE  TRUST  IDEA. 

Here,  in  an  idea  only  half  worked  out,  was  the  egg 
of  the  modern  trust  system.  The  hatching  process  was 
equally  natural.  The  dazzling  advantages  of  such  a  revo- 
lution (to  those  behind  the  revolution)  were  apparent 
enough.  A  willingness  to  gather  great  wealth  quickly 
was  quite  sufficient  as  a  motive.  There  seemed  to  be  no 
occasion  to  bother  about  scruples  and  ethical  conun- 
drums for  were  they  not  simply  assisting  a  natural 
economic  evolution — serving  as  well-paid  midwives  at  a 
birth  which  was  inevitable  without  them?  The  only  re- 
maining question  was,  "Can  it  be  done?" 

(b)  A  partial  affirmative  answer  seemed  to  be  at 
hand  in  the  overwhelming  and  sustained  success  of  the 
Standard  Oil  Trust.  True,  that  concern  had  started  long 
ago  under  special  conditions,  when  the  petroleum  indus- 
try was  largely  a  mining  venture,  had  brought  order  and 
success  out  of  chaos  and  failure,  and  had  not  formally 
taken  control  of  a  whole  industry.  It  was  still  doing 
business  against  some  competition  at  home  and  against 
powerful  and  alert  rivalry  abroad.  But  it  was  known 
to  control  prices  here,  both  of  the  crude  and  refined 
products,  and  of  its  enormous  profits  there  was  no  occa- 
sion to  doubt.  With  aggregate  dividends  of  $91,415,000 
on  its  stock  in  the  three  years  ending  with  1898,  with  its 
$100  shares  selling  at  490,  making  the  value  of  the  busi- 


THE  PROFESSIONAL  PROMOTER.  51 

ness  over  476  million  dollars,  it  is  not  surprising  that 
the  example  of  the  semi-monopoly  of  the  Standard  was 
irresistibly  seductive  to  persons  who  were  under  tempta- 
tion to  go  and  do  likewise  in  other  fields. 

(c)  Omitting  minor  ventures,  a  group  of  gentlemen 
formed  a  plan  for  consolidating  the  sugar  refining  indus- 
try of  America  in  a  single  combination.  After  a  few 
false  steps  the  colossal  undertaking  became  a  substantial 
success.  The  Sugar  Trust  began  in  1887-9,  by  absorbing 
twenty  independent  refineries,  representing  over  90  per 
cent  of  refining  capacity  in  the  United  States,  and  sub- 
sequently increased  this  to  98  per  cent.  Attacked  in  the 
courts  of  New  York  as  an  illegal  combination  in  restraint 
of  trade,  it  was  dissolved  as  a  trust  proper,  and  reap- 
peared in  1891,  as  a  single  corporation  of  New  Jersey, 
capitalized  at  $73,936,000,  one-half  preferred  stock  and 
one-half  common.  For  six  years  ending  with  1898,  the 
company  (with  only  a  nominal  investment  of  capital  out- 
side of  that  already  supplied  by  its  own  net  earnings) 
paid  7  per  cent,  dividends  on  its  outstanding  preferred 
shares,  and  an  average  of  12  per  cent,  on  its  outstanding 
common. 

This  spectacular  success  in  sugar  under  the  leader- 
ship of  the  Havemeyers,  added  to  the  long  record  of  the 
Standard  Oil,  almost  completed  the  affirmative  answer 
to  the  question,  "Can  it  be  done?"  The  fabulous  profits 
earned  by  the  re-organized  Sugar  Trust  and  paid  as  divi- 
dends on  stock  which  was  mainly  water,  added  fuel  to  the 
zeal  of  the  gentlemen  who  had  their  eyes  on  other  indus- 
tries, and  the  query  began  to  rise  in  the  minds  of  many 
sagacious  and  pushing  men,  some  with  and  some  without 
financial  connections,  Why  cannot  we  duplicate  the 
Havemeyer  deal  on  a  smaller  scale?  And  in  the  sunshine 
of  events  many  of  these  men  east  and  west  blossomed 
into  professional  promoters. 


52  TRUSTS  OR  COMPETITION? 

METHOD  OF  TRUST  BUILDING. 

(d)  The  tide  of  great  business  prosperity  which  set 
in  after  the  elections  of  1896  furnished  a  condition  with- 
out which  there  would  now  be  no  history  of  the  trust 
movement  to  write.  The  conspicuous  feature  of  the 
period,  not  yet  wholly  passed,  was  the  marvelous  revival 
and  overflow  of  financial  confidence,  following  a  long  sea- 
son of  commercial  dry-rot  and  pessimism.  This  resulted 
in  the  unlocking  of  a  vast  amount  of  investment  capital, 
whose  owners  seemed  anxious  only  lest  somebody  else 
should  get  before  them  in  obtaining  whatever  securities 
were  offered  through  respectable  banking  channels. 
Probably  never  in  the  history  of  any  country  was  an  in- 
vesting public  so  indiscriminatingly  omnivorous.  This 
fact  was  instantly  recognized  by  the  promoting  class  as 
assuring  success  for  a  long  list  of  "industrial"  consolida- 
tions, provided  two  remaining  elements  could  be  counted 
on:  First,  would  leading  bankers  and  trust  company  offi- 

The  American  Writing  Paper  Company  consolidated  into  a  trust 
twenty-seven  plants,  with  options  on  several  other  smaller  ones.  Of  the 
twenty-seven  concern8  twenty-four  had  an  aggregate  capacity  of  250 
tons  daily.  A  leading  banking  institution  of  New  York,  which  had  been 
asked  to  finance  the  combination,  privately  learned  that  the  price  actually 
to  be  paid  for  the  sixteen  mills  around  Holyoke  and  Springfield,  Mass., 
having  an  aggregate  daily  capacity  of  227  tons,  was  $6,684,000.  The  capacity 
of  the  other  eight  New  England  mills  was  only  32  tons  per  day,  leaving 
the  three  mills  in  Wisconsin  with  capacity  not  stated.  All  the  twenty- 
seven  mills  cost  the  promoters  not  much  over  $7,000,000,  and  the  former 
owners  considered  that  they  were  getting  fancy  prices  for  their  prop- 
erty, or  they  would  not  have  sola.  Their  reasonable  cash  value,  includ- 
ing good-will,  may  possibly  have  reached  $5,000,000.  The  trust  organiza- 
tion was  floated  with  a  capitalization  of  $42,000,000,  or  more  than  six 
times  the  maximum  cost  at  inflated  values.  The  capital  of  the  trust 
was  made  up  of  bonds,  $17,000,000;  preferred  stock,  $12,500,000;  common 
stock,  $12,500,000.  From  the  proceeds  of  bond  sales.  $2,500,000  was  placed 
in  the  treasury  of  the  corporation  as  working  capital.  In  their  pub- 
lished prospectus  (September,  1899)  the  bankers  of  the  new  trust.  Lee, 
Higginson  &  Co.,  of  Boston,  after  stating  that  the  combination  of  twenty- 
seven  mills  represented  84  per  cent,  of  the  total  production  in  New  Eng- 
land and  over  76  per  cent,  of  the  entire  output  of  fine  writing  paper  in 
the  United  States,  said:  "The  combination  of  these  companies  will 
naturally  result  in  extensive  advantages,  improvements  and  economies, 
and  our  best  advices  from  most  competent  men  indicate  that  the  net 
earnings  of  the  new  company  will  not  be  less  than  $2,200,000  (and  this 
without  Increased  output),  which  is  equivalent  to  interest  and  sinking 
fund  of  the  bonds,  seven  per  cent,  dividend  on  the  preferred,  and  three 
to  four  per  cent,  on  the  common  stock." 


METHODS  OF  THE  TRVST  BUILDERS.  53 

cials  consent  to  finance  the  proposed  consolidations,  by 
first  underwriting  the  several  propositions  and  then  mar- 
keting the  resulting  stocks  and  bonds  with  the  public? 
Second,  would  the  manufacturers,  the  real  owners  of 
existing  plants,  consent  to  give  up  ownership  and  man- 
agement of  their  businesses  and  merge  them  in  a  trust? 
Inquiry  among  bankers  promptly  developed  the  fact  that 
on  a  satisfactory  basis  they  were  ready  for  this  line  of 
business,  and  that  in  fact  many  of  them  were  already  in- 
terested. Then,  with  as  many  different  methods  of  ap- 
proach and  as  many  varying  details  of  result  as  there  are 
industries  to  consolidate,  the  promoters,  each  having  first 
made  a  study  of  his  selected  line  of  manufacture,  pro- 
ceeds to  lay  before  manufacturers  the  glories  of  the  trust 
system,  and  ascertain  their  temper  towards  it — in  most 
cases  with  this  general  course  and  outcome: 

(e)  Some  entire  industries  wholly  refuse  to  enter- 
tain the  project,  and  in  those  lines  no  trusts  are  formed. 
The  promoter's  efforts  fail.  In  the  others  the  out-of-date, 
unprofitable  and  failing  concerns — the  lame  ducks  of 
each  industry,  welcome  the  suggestion  of  consolidation 
and  are  not  over-particular  as  to  terms.  The  modern, 
successful  and  profit-earning  companies  are,  for  the  most 
part,  either  averse  to  the  change  or  coolly  curious  to 
know  at  the  outset  how  far  the  movement  has  already 
progressed  and  what  sort  of  an  offer  is  likely  to  be  made 
to  them.  With  the  shining  example  of  the  Sugar  Trust  as 
a  text  and  warrant,  the  promoters  are  able  to  make  up 
a  prospectus  that  would  interest  any  manufacturer  who 
is  mortal.  Always,  everywhere  and  foremost  is  urged 
the  overshadowing  financial  value  of  the  monopoly  of 
production  and  sale,  which  is  to  be  enjoyed  by  the  trust 
resulting  from  the  proposed  consolidation.  Without  this 
feature  of  monopoly  there  would  have  been  no  visitation 
by  the  promoter,  no  waste  of  time  by  the  manufacturers, 
and  no  talk  about  trusts.  In  the  absence  of  this  noble 
Dane  there  would  have  been  no  economic  play  of  Ham- 


54  TRUSTS  OR  COMPETITION^ 

let.  All  negotiations  are  conditioned  upon  the  ability 
of  the  promoters  to  get  the  assent  of  at  least  85  to  90 
per  cent,  in  producing  capacity,  of  manufacturers — the 
well-grounded  theory  being  that,  controlling  so  large  a 
proportion  of  an  industry,  the  trust,  by  one  of  several 
well-known  methods,  can  soon  make  it  for  the  interest  of 
the  minority  outsiders  to  come  in  or  retire  from  business 
— unless  it  should  seem  diplomatic  to  leave  in  the  field  a 
few  minor  independent  concerns  to  continue  business  on 
sufferance  of  the  trust,  keep  up  a  semblance  of  competi- 
tion and  thus  hoodwink  the  public  into  believing  there 
was  no  monopoly. 

Such  liberal  terms  as  to  purchase  of  their  plants  and 
sometimes  as  to  their  own  place  in  the  management  of 
the  future  trust,  are  usually  made  with  certain  leading 
manufacturers  as  will  induce  them  to  give  the  weight 
of  their  names  to  the  project.  Others,  influenced  by  these 
prominent  examples,  indicate  their  willingness  to  come  in 
provided  terms  are  right.  To  those  who  are  still 
reluctant  pressure  is  applied  by  the  significant  sugges- 
tion that  they  will  be  in  a  particularly  bad  fix  if  the 
trust  is  formed  and  they  are  left  on  Ibe  outside.  Finally, 
the  problem  is  reduced  to  one  of  making  terms  of  pur- 
chase or  absorption  satisfactory  to  each  concern  form- 
ing part  of  the  industry. 

PLANTS  OVERVALUED,  CAPITAL  INFLATED. 

And  just  here  comes  in  the  most  phenomenal  feature 
of  this  entire  trust  movement.  Bearing  in  mind  the  fact 
that,  with  rare  exceptions,  every  m?m  will  sell  any  busi- 
ness property  he  possesses  if  a  sufficient  sum  is  offered 
for  it,  the  process  of  consolidating  an  industry  into  one 
ownership  by  purchasing  all  its  factories,  becomes  a 
simple  one  provided  the  purchaser  or  purchaser's  agent 
is  not  limited  as  to  the  price  he  shall  pay.  Practically 
this  is  the  amazing  situation  in  most  cases  when  the  aver- 
age promoter  approaches  manufacturers  with  a  view 


SOME   EXPERT    TESTIMONY.  55 

to  starting  the  organization  of  a  trust.  Doubtless  in 
some  instances  i'airly  conservative  valuations  have  been 
placed  on  the  plants  of  an  industry  and  the  resulting 
trusts  have  been  reasonably  capitalized.  These  are  be- 
lieved to  be  a  small  minority  of  the  whole.  Usually  even 
when  plants  are  paid  for  wholly  or  mainly  in  cash  the 
consideration  is  far  in  excess  of  the  real  money  value, 
simply  because  the  promoter  is  not  buying  for  himself, 
or  for  any  specific  purchaser,  is  not  limited  as  to  price 
to  be  paid,  and  needs  to  have  the  prompt  assent  of  the 
manufacturers  in  order  to  prevent  a  collapse  of  the  plan 
through  simple  delay.  As  all  these  facts  are  known  to 
the  cool-headed  manufacturer,  he  names  his  own  terms, 
accepts  his  price,  and  steps  out  of  the  business,  a  capital- 
ist— unless  his  salaried  services  have  been  engaged  for 
the  new  management. 

With  the  manufacturer  who  becomes  the  owner  of 
trust  stocks  or  bonds,  with  the  bankers  who  finance 
these  undertakings,  and  with  the  investing  public  which 
buys  these  securities  with  both  eyes  shut,  the  upper- 
most thought  is  that  the  perpetual  monopoly,  the  free- 
dom from  competition,  will  enable  the  trust  to  pay  satis- 
factory dividends  on  any  capitalization  it  chooses  to 
adopt. 

EXPERT  TESTIMONY. 

In  proof  that  this  outline  of  the  genesis  of  the  aver- 
age trust  is  a  picture  from  life,  and  by  way  of  showing 
how  overcapitalization  is  brought  about,  note  the  follow- 
ing frank  and  voluntary  testimony  from  one  who  prob- 
ably knows  more  about  the  facts  from  an  inside  view 
than  any  other  person.  Mr.  Jas.  B.  Dill  is  a  leading  cor- 
poration Iaw7yer  of  New  York  City,  and  is  also  a  member 
of  the  New  Jersey  Bar.  He  shared  in  framing  the  pres- 
ent New  Jersey  statute  governing  the  chartering  of  cor- 
porations for  that  state,  drew  the  charters  for  and  super- 
vised the  organization  of  half  a  score  of  the  largest  of 
modern  industrial  corporations^  and  is  a  director  in  nearly 


56  TRVSTS  OR  COMPETITION* 

all  of  the  former.  When  in  Chicago,  attending  the  re- 
cent conference  on  trusts  and  combinations,  as  a  looker- 
on  in  the  interests  of  the  corporations  represented  by 
him,  Mr.  Dill  gave  out  a  prepared  statement,  in  which, 
after  explaining  that  there  are  honest  trusts  reasonably 
capitalized,  and  dishonest  trusts  overcapitalized,  he  used 
this  language: 

The  evils  of  these  dishonest  corporations  arise  in  the  methods 
followed  by  the  promoters.  Suppose,  for  instance,  some  promoter 
conceives  the  idea  of  consolidating  the  plants  engaged  in  a  certain 
line  of  manufacturing.  He  goes  to  the  owners  of  the  plants  and  gets 
options.  He  needs  money,  so  he  goes  to  some  bank  and  lays  the  op- 
tions before  them,  with  a  proposition  to  finance  the  combination. 
Say,  for  example,  that  the  plants  are  worth  $5,000,000.  He  would  de- 
mand $500,000  for  his  options,  and  a  half  of  the  profits.  If  the  bank 
agrees  the  promoter  goes  to  the  owners  of  the  plants  and  tells 
them  that  he  can  pay  them  a  quarter  of  their  value  in  cash  and  the 
remainder  in  preferred  stock,  but  as  a  special  inducement  he  offers 
them  a  like  amount  of  common  stock.  By  this  deal  the  capitalization 
is  doubled,  and  becomes  $10,000,000.  But  this  would  leave  nothing 
for  the  bank  which  is  financing  the  deal,  so  the  bank  must  again 
double  the  capital  in  order  to  give  a  proper  margin.  But  the  stock 
of  such  a  corporation  will  sell  only  from  40  to  60  cents  on  the  dollar 
when  placed  on  the  market,  so  another  $10,000,000  is  added,  and 
the  capital  stock  becomes  $30,000,000,  while  the  actual  value  is 
$5,000,000.  Then  the  promoter  and  the  bank  quietly  sell  their  stock 
for  what  it  will  bring,  and  the  corporation  is  left  in  the  hands  of 
the  stockholders  with  immense  fixed  charges  to  pay  on  watered  stock. 
Reduction  in  wages  follows,  which  means  a  corresponding  reduction 
in  the  quality  of  the  article  manufactured,  prices  are  advanced  as 
far  as  possible,  and  the  corporation  struggles  on  until  failure  and 
reorganization  take  place  after  immense  losses  to  stockholders  and 
employes. 

Certainly  not  in  five  per  cent  of  the  trust  organiza- 
tions thus  far  completed  has  the  movement  to  consoli- 
date and  monopolize  an  industry  originated  spontane- 
ously with  the  solvent  manufacturers  representing  such 
industry.  With  so  few  exceptions  as  only  to  prove  the 
rule,  an  expert  promoter  or  group  of  promoters,  includ- 
ing one  or  more  bankers,  has  in  each  instance  conceived 
the  idea,  formed  the  plan,  solicited  manufacturers'  op- 
tions, plied  the  arts  of  diplomacy  with  the  owners  of  fac- 
tories, framed  prospectuses  and  negotiated  with  moneyed 
institutions  for  financing  the  "deal"  and  for  selling  the 
resulting  stocks  and  bonds  to  the  investing  public. 


THE  ARGUMENT  AGAINST  THE  TRUST.  6? 

THE  MEN  BEHIND  THE  TRUST. 

If  this  freehand  sketch  of  the  origin  of  the  monopoly 
trust  system,  as  confirmed  by  the  highest  expert  testi- 
mony, is  substantially  accurate,  and  it  will  be  recognized 
as  such  by  those  who  are  informed  on  the  subject,  then 
these  conclusions  are  justified: 

1.  The  trust  system  of  to-day  did  not  originate  with 
the  men  who  alone  could  have  a  legitimate  interest  in 
launching  such  a  movement  because  it  might  improve 
and  cheapen  production — the  owners  of  manufactories. 

2.  The  four  classes  of  citizens  who  have  contrib- 
uted to  the  surprising  result,  the  first  two  actively  and 
the  last  two  passively,  are  shown  to  be:    (1)  The  promo- 
ters, whose  sole  motive  has  been  the  large  commission 
or  profits  for  transient  service  in  bringing  about  the  sev- 
eral consolidations.    Not  one  has  or  wishes  to  have  any 
interest  in  the  permanent  economic  questions  affecting 
productive  industries.       (2)       Certain  eastern  bankers, 
whose  sole  motive  has  been  the  still  larger  profits  and 
commissions  resulting  from  capitalizing  the  trusts  and 
selling  trust  securities  to  investors  who  largely  rely  on 
their  judgment  and  recommendation.    Not  one  of  these 
bankers  but  would  smile  in  private  at  the  suggestion 
that  his  activity,  agency  and  profits  as  a  trust  promoter 
formed  part  of  an  "orderly  economic  evolution."   (3)  The 
manufacturers,  whose  motives  have  varied  according  to 
their  condition.     Those  in  financial  distress  have  wel- 
comed the  trust  as  an  escape  from  bankruptcy.    Those 
who  were  offered  twice  the  value  of  their  plants  needed 
no  other  motive.  Those  who  wished  to  remain  in  the  busi- 
ness of  a  lifetime,  but  apprehended  the  club  of  the  trust 
if  they  held  out,  yielded  to  their  fears  and  sought  conso- 
lation in  cash,  bonds,  stocks  and  retirement.    Those  who 
accepted  influential  positions  in  the  management  of  trust 
affairs,  in  addition  to  other  satisfactory  terms,  required 
no  other  inducement.    Not  one  manufacturer,  so  far  as 
heard  from,  considered  himself  as  yielding  to  an  eco- 


58  TRUSTS  OR  COMPETITION? 

noraie  evolution  which  relentlessly  urged  him  and  his  fel- 
lows on  to  "still  larger  aggregations  of  capital,  labor  and 
effort."  (4)  Finally  the  investors,  who  simply  knew  that 
they  wanted  in  large  amounts  securities  which  leading 
bankers  and  brokers  represented  as  being  both  safe  and 
profitable;  who  made  no  investigation  for  themselves  as 
to  the  real  assets  owned  by,  or  the  absurd  overcapitaliza- 
tion of,  the  companies  whose  bonds  and  stocks  they  eag- 
erly absorbed,  and  who  had  the  vague  notion  that  the 
monopoly  advantage  of  the  trusts  would  offset  any  de- 
gree of  inflation.* 

MONOPOLY-HUNGER,  NOT  EVOLUTION. 

1.  Back  of  these  four  classes  of  ordinary  mortals 
whose  simple  motives  are  all  on  the  surface,  lies  this 
fundamental  fact:  All  men  have  known  in  all  ages  that 
in  private  monopoly,  when  permitted,  there  is  great  and 
quick  wealth,  but  the  understanding  has  hitherto  been 
that  the  law  prohibited  this  unfair  advantage  of  the  few 
over  the  many.    Somewhat  suddenly  the  belief  has  spread 
like  contagion  in  America,  based  largely  on  the  immunity 
of  the  Sugar  Trust  and  one  or  two  other  pioneers  in  this 
field,   that  the  American   people   will   tolerate   private 
monopoly  of  the  production  and  sale  of  necessary  com- 
modities— or,  rather,  that  they  have  no  defense  against  it. 
A  hint  was  sufficient.    The  only  road  to  such  monopoly 
lay  through  the  unification  of  the  several  industries,  and 
with  the  signal  once  given  and  the  method  made  plain, 
the  self-seeking  rush  followed,  as  to  a  new  Klondike. 
With  such  unnatural  and  incredible  inducement,  "sur- 
passing the  dreams  of  avarice,"  on  the  one  side,  and 
human  nature  on  the  other,  no  different  result  was  pos- 
sible.   In  this  sense  the  movement  is  natural. 

2.  In  the  light  of  these  facts  it  becomes  manifest 

*A  Broad  Street  broker,  with  more  accuracy  than  elegance  has  char- 
acterized the  Men  Behind  the  Trust  in  the  order  of  activity  as  the 
Promoters,  the  Promoter-Bankers,  the  Quitters  and  the  Suckers. 


THE  DEADLY  PARALLEL  COLUMN.          59 

that  the  central  and  determining  element  in  the  trust 
movement,  monopoly,  is  not  in  any  sense  nor  to  any 
extent  whatever  an  economic  evolution,  an  orderly  de- 
velopment from  preceding  conditions  under  the  stress  of 
an  imperious  law  which  nobody  can  either  understand 
or  resist.  On  the  contrary  it  is  shown  to  be  an  artificially 
stimulated  movement,  solely  prompted  by  ordinary,  vul- 
gar human  motives  and  enabled  to  succeed  for  the 
time  partly  because  of  extraordinary  investment  condi- 
tions in  the  country,  but  mainly  because  of  the  previous 
neglect  of  the  public  to  provide  adequate  legal  safeguards 
against  forms  of  private  monopoly  which,  until  recently, 
no  one  suspected  would  ever  attempt  to  invade  popular 
rights.  It  is  the  offspring  of  a  smug  and  thrifty  philosophy 
of  self-seeking  on  a  gigantic  scale,  masquerading  as  an  in- 
evitable and  scientific  industrial  development.  If  gross 
intoxication  is  the  scientific,  necessary  and  logical  con- 
clusion of  the  tonic  use  of  wine,  then  it  may  be  sci- 
entific and  inevitable  to  carry  the  process  of  competitive 
industrial  development  to  the  stage  of  systematic  and 
universal  monopoly — its  exact  opposite.  The  tendency 
toward  large-scale  production  in  the  interest  of  maxi- 
mum economy  and  efficiency  is  a  natural  evolution  and 
right;  the  rush  past  that  maximum  to  monopoly  for 
monopoly's  sake  is  strictly  artificial  and  wrong.  The  one 
is  sobriety;  the  other  is  economic  debauch. 

Perhaps  the  deadly  parallel  column  may  illustrate 
this  point: 

Fact.— Personal  liberty,  exercised  Fact.— Industrial  liberty  of  concen- 
wlthln  the  linea  of  law  and  order,  tratlon  held  within  the  lines  of 
Is  beneficial  to  the  Individual  and  maximum  efficiency  and  economy 
to  society  a^d  °*  effective  competition,  is 

beneficial  to  the*  Individual  and  to 

society. 

Fallacy.— Therefore,  personal  lib-  Fallacy.— Therefore,  Industrial  lib- 
erty exercised  without  regard  to  erty  of  concentration  carried  be- 
law  and  order  and  carried  to  the  yond  the  lines  of  maximum  eflS- 
stage  of  anarchy,  which  means  ciency  and  economy  and  of  ef- 
the  bondage  of  all  to  the  forces  fective  competition  ,to  the  stagre 
of  barbarism,  is  also  beneficial  to  of  universal  private  monopoly, 
the  individual  and  to  society.  which  means  industrial  bondage 

of  the  many  to  the  few,  Is  also 

beneficial  to  the  Individual  and  to 

society. 


60  FRVST8  OK  COMPETITION  f 

TRUSTS  IN  OTHER  COUNTRIES. 

It  is  urged  that  the  universality  of  the  trust  move- 
ment proves  its  natural  and  inevitable  character,  and 
then  the  statement  is  made  that  England  rivals  America 
in  number  and  magnitude  of  industrial  trusts.  This  is 
a  curious  error.  Neither  in  Great  Britain  nor  on  the 
continent  of  Europe  is  there  a  state  of  things  correspond- 
ing to  what  we  understand  by  the  trust  movement  in  the 
United  States.  In  Great  Britain  the  facts  are  these: 
There  exists  the  same  general  tendency  as  here  toward 
enlargement  of  plants  and  capital  in  the  interest  of 
greater  economy  and  efficiency  in  production  and  this 
is  often  accomplished  by  means  of  consolidating  two  or 
more  previously  competing  concerns.  Both  mercantile 
and  manufacturing  establishments,  some  of  which  were 
built  up  by  partnerships  running  through  generations, 
have  in  recent  years  been  put  in  corporate  form,  reason- 
ably capitalized,  and  their  stocks  and  bonds  under  the 
name  of  "industrials"  constitute  a  favorite  investment  of 
the  British  people.  This  class  of  securities  now  reaches 
an  aggregate  amount  of  more  than  400  millions  sterling. 
They  are  in  nearly  all  cases  the  shares  or  obligations  of 
large,  independent  establishments  engaged  in  legitimate 
competitive  pursuits  and  bearing  no  resemblance  to 
American  monopoly-trusts.  In  several  trades  there  are 
various  forms  of  association  and  agreement  with  a  view 
to  adjusting  supply  to  demand  and  preventing  what  is 
known  there,  as  here,  as  cut-throat  competition.  Of  this 
class  are  the  trades  combinations  originated  by  Mr.  E.  J. 
Smith,  of  Birmingham,  fully  explained  in  this  volume, 
but  Mr.  Smith  appears  never  to  have  seen  a  typical  Amer- 
ican trust  in  England  and  on  information  he  denounces 
it  as  monopolistic  and  injurious.  Aside  from  the  Thread 
combination,  which  is  about  half  American,  there  is 
scarcely  an  instance  in  Great  Britain  where  a  successful 
attempt  has  been  made  to  absorb  into  a  single  owner- 
ship and  thus  monopolize  an  entire  industry  on  the  Amer- 


AS   TO    TRUSTS   IN    GREAT   BRITAIN.  61 

ican  plan.  Special  investigation  confirms  the  indications 
of  current  English  journalism  and  if  further  corrobora- 
tion  were  needed  it  is  furnished  by  the  following  pointed 
letter  from  one  of  the  best  informed  gentlemen  in  Her 
Majesty's  foreign  service,  the  British  Consul-General  at 
New  York: 

HEB  BRITANNIC  MAJESTY'S  CONSULATE  GENERAL. 
New  York,  Oct.  17, 1899. 

Sir:— With  reference  to  your  letter  of  the  14th  inet.,  it  does 
not  appear  to  me  that  the  industrial  trust,  absorbing  the  leading  in- 
dustries of  the  country,  prevails  to  any  considerable  extent  in  Great 
Britain,  at  present.  Complaints  are  made  from  time  to  time  of  com- 
binations between  railway  companies  and  the  owners  of  shipping 
which  lead  to  a.  practical  monopoly  in  a  particular  branch  of  trans- 
port, and  in  this  way  are  said  to  favor  the  foreign  producer,  to  the 
detriment  of  native  production  or  industry.  But  so  far  as  I  am 
aware,  there  has  not  been  in  Great  Britain  the  same  tendency  to 
establish  organizations  to  obtain  the  ownership  or  control  of  all  or 
nearly  all  the  plants  or  factories  of  a  given  industry,  for  the  purpose 
of  establishing  a  practical  monopoly. 

Yours  faithfully, 

PERCY   SANDERSON. 
Mr.  A.  B.  Nettleton,  Chicago. 

Substantially  the  same  condition  prevails  in  Ger- 
many, where  the  conversion  of  private  partnerships  into 
capitalized  industrial  corporations,  often  accompanied 
with  the  union  of  two  or  more,  has  recently  reached  a 
speculative  stage;  but  the  characteristic  feature  of  the 
American  movement,  namely,  .the  systematic  monopoliz- 
ing of  an  entire  industry  by  one  corporation  is  only  no- 
ticeable by  its  absence  or  its  rarity. 

There  are  practically  no  trusts  in  Canada,  yet  the 
Dominion's  export  trade  is  advancing  by  leaps  and 
bounds.  That  is  a  curious  form  of  natural  evolution 
which  scrupulously  respects  political  boundary  lines — as 
if  a  Dakota  cyclone  should  abruptly  retire  from  business 
on  reaching  the  Manitoban  border.  In  reply  to  a  speci- 
fic inquiry  the  editor  of  the  Toronto  Globe,  under  date  of 
October  23,  1899,  sends  this  statement:  "There  are  few 
if  any  Canadian  trusts.  In  Toronto,  there  has  been  a 
local  combine  of  the  bicycle  industry,  but  it  is  scarcely  on 
the  scale  of  a  trust."  [See  appendix  to  this  Argument.] 


62  TRUSTS  OR  COMPETITION? 

III.    SOME  TRUST  BENEFITS  FICTITIOUS,  OTHERS  OVERSTATED. 

1.  Cheapened  Production. — Perhaps  the  leading 
argument,  purely  economic  in  character,  in  behalf  of  the 
trust  system  is  that  the  cost  of  production  is  thereby 
largely  reduced,  with  great  resulting  advantage  to  pro- 
ducer and  consumer.  This  claim  is  weakened  by  a  three- 
fold fallacy:  (1)  There  is  a  well-defined  limit  beyond 
which  no  advantage  in  cost  of  production  results  from 
increased  size  of  plant.  (2)  The  average  trust  is  not 
massing  production  in  one  or  more  great,  modern  estab- 
lishments, but  is  buying  and  then  maintaining  from  five 
to  forty  existing  and  widely  separated  plants,  represent- 
ing all  grades  of  efficiency  and  inefficiency;  hence  it  can 
lay  no  claim  to  the  best  economic  conditions  and  results 
in  production.  (3)  Whatever  advantage  in  the  form  of 
cheapened  production  results  from  greater  capacity  of 
plant  is  realized  by  individual  establishments  of  large 
size,  adequate  capital  and  competent  management,  with- 
out any  necessity  whatever  for  invoking  the  trust  or 
monopoly  feature.  On  the  first  point  hear  Henry  Carter 
Adams,  professor  of  political  economy  in  the  University 
of  Michigan,  whose  paper  presented  at  the  recent  trust 
conference  in  Chicago  is  given  in  full  in  this  volume: 

It  is  common  to  say  that  increase  in  the  size  of  manufacturing 
plants  permits  the  production  of  commodities  at  less  cost  than  would 
otherwise  be  the  case.  There  is  undoubtedly  some  truth  in  this 
statement.  The  development  of  machinery  has  gone  hand  in  hand 
with  the  growth  of  factories,  and  as  a  result  the  product  is  furnished 
at  a  cheapened  rate.  But  there  is  a  limit  to  the  application  of  this 
rule.  Every  manufacturing  industry,  considered  from  the  point  of 
view  of  production,  has  at  any  particular  time  a  size  which  may  be 
regarded  as  its  normal  size  of  maximum  efficiency.  This  normal  of 
maximum  efficiency  is  determined  by  the  extent  to  which  division  of 
labor  and  the  use  of  machinery  can  be  applied.  To  increase  such  an 
industry  by  one-half  would  not  result  in  a  decrease  of  the  cost  of 
manufacture,  for  it  would  occasion  a  less  effective  application  of  the 
principle  of  division  of  labor. 

While,  therefore,  it  is  true  that  the  concentration  of  capital  and 
labor  under  a  single  direction  is  followed  by  economy  up  to  a  certain 
point  it  is  not  true  that  combination  and  concentration  beyond  that 
point  tend  to  reduce  the  cost  of  production.  He  who  accepts  this 
statement  of  the  case  must  conclude  that  manufacturing  combina- 


LIMIT  OF  ECONOMY  IN  PRODUCTION.  63 

tions,  I  say  nothing  of  other  forms,  contribute  nothing  to  the  reduction 
of  the  cost  of  manufacture  beyond  what  would  be  contributed  should 
each  of  the  industries  continue  its  independent  competitive  existence. 
This  is  a  curt  answer  to  a  profound  question,  but  it  is  believed  to  rest 
upon  sound  analysis  and  to  lead  to  the  conclusion  that  the  motive  to 
a  trust  organization  of  manufacturing  industries  is  not  found  in  a 
desire  to  benefit  the  public  by  the  reduction  of  cost. 

This  broad  statement  of  a  permanent  economic  prin- 
ciple is  concurred  in  by  most  authorities  and  is  con- 
firmed by  the  actual  experience  of  manufacturers.  To 
repeat:  The  maximum  of  advantage  resulting  from 
great  aggregations  of  workmen,  machinery  and  capital 
in  a  manufacturing  industry,  so  far  as  concerns  cost  of 
production,  is  reached  in  those  individual  establishments 
which  have  (1)  sufficient  size,  (2)  competent  management, 
(3)  adequate  capital.  To  a  plant  of  this  character  the 
trust  system  can  bring  no  advantage  whatever  in  the  way 
of  reducing  cost  of  output.  On  the  contrary,  by  merging 
such  a  concern  under  the  trust  system  in  a  mob  of  scat- 
tered establishments  of  good,  bad  and  indifferent  char- 
acter and  management,  the  result  is  more  likely  to  be 
the  reverse  of  that  claimed  by  trust  advocates.  As  an 
illustration,  take  the  Baldwin  Locomotive  Works  of  Phil- 
adelphia, whose  engines  go  in  numbers  to  China,  Japan, 
Russia,  and  even  to  England.  It  would  provoke  a  smile  to 
suggest  that  their  cost  of  production  and  hence  their  abil- 
ity to  capture  foreign  markets  and  "meet  and  vanquish" 
the  competition  of  European  locomotive-builders  would 
be  improved  by  entering  a  trust.  The  trusts  cannot  sud- 
denly dismantle  most  of  the  plants  they  buy,  and  then 
concentrate  production  in  a  number  of  colossal  and  mod- 
ern establishments  in  which  the  best  conditions  may  be 
secured.  Such  a  course  would  involve  a  sacrifice  of  as- 
sets and  good-will  that  would  be  prohibitive.  But  without 
pursuing  such  a  policy  the  trust  is  obliged  to  do  the  best 
it  can  with  the  plants  it  takes  over,  and  it  cannot  get 
from  such  a  situation  anything  like  the  maximum  of  effi- 
ciency and  economy.  Several  scores  of  promising  trusts 


64  TRUSTS  OR  COMPETITIONt 

are  likely  to  encounter  this  economic  disillusionment 
before  the  new  century  is  out  of  swaddling  clothes. 

2.  REDUCED  COST  OF  MARKETING  PRODUCT. 

The  advantages  claimed  under  this  head  are  not 
groundless  in  relation  to  most  industries,  but  they  have 
been  pretty  uniformly  overstated  to  investors  and  the 
general  public.  Two  leading  elements  in  the  former 
cost  of  marketing  manufactured  commodities  have  been 
advertising  and  the  employment  of  traveling  men.  Be- 
yond doubt  some  saving  can  be  made  in  these  particulars, 
chiefly  by  avoiding  the  duplication  of  selling  effort  for 
the  same  class  of  goods  in  the  same  field.  But  to  what- 
ever extent  the  trust-organizers  have  counted  on  prac- 
tically cancelling  expenditure  for  these  two  items,  on 
the  ground  that  buyers  will  be  obliged  to  come  to  the 
sole  manufacturers,  they  are  likely  to  be  surprised. 
Those  trusts  that  have  tried  this  experiment  have  dis- 
covered that  demand  for  commodities  falls  off  with  re- 
markable rapidity  as  soon  as  effort  in  pushing  sales  is 
materially  reduced.  To  an  extent  which  few  appreciate, 
the  buying  public  has  become  accustomed  to  being  re- 
minded of  its  needs  before  making  purchases.  The  coun- 
try merchant  often  has  more  inertia  than  enterprise,  and 
with  the  periodical  visits  of  his  favorite  drummer  dis- 
continued, his  orders  dwindle  or  are  delayed  until  un- 
seasonable. Except  in  staple  and  absolutely  necessary 
commodities,  demand  is  largely  created  and  maintained 
by  advertising  through  periodicals,  catalogues  or  travel- 
ing salesmen.  Hence,  the  trust  that  expects  to  save  the 
bulk  of  this  important  item  must  also  expect  to  lose 
through  diminished  sales  more  than  the  economy  repre- 
sents. This  is  not  theory,  but  the  testimony  of  leading 
dealers  in  many  lines.  A  further  fact  must  be  reckoned 
with,  at  least  until  the  public  has  received  a  new  revela- 
tion, and  that  is  that  the  deep-seated  prejudice  against 
trusts  as  unfair  monopolies  will  tend  to  diminish  the 


TRUSTS  AND  OUR  FOREIGN  TRADE.  65 

consumption  of  trust-made  goods.  Increased  effort,  cost- 
ing money,  will  be  needed  to  counteract  or  compensate 
for  this  drawback. 

3.  ENLARGING  OUR  FOREIGN  TRADE. 

The  trust  argument  on  this  point  is  weak,  both  on 
its  economic  and  its  ethical  side.  The  claim  persistently 
made  that  monopoly-trusts  are  a  necessary  means  for 
enabling  American  producers  to  meet  foreign  competi- 
tion in  foreign  markets  and  that  an  enormous  proportion 
of  the  recent  increase  in  American  exports  of  manufac- 
tured goods  has  been  accomplished  by  these  organiza- 
tions and  mainly  because  of  their  trust  character  is 
simply  fallacious.  On  the  contrary,  the  maximum  of 
efficiency  and  usefulness  in  these  directions  has  been 
reached  by  those  great  independent  establishments 
which  have  no  alliance  with  or  sympathy  for  the  mo- 
nopoly-trust method  of  doing  business.  It  is  only  neces- 
sary to  refer  to  a  few  of  the  concerns  which  are  doing 
more  than  all  the  trusts  combined  to  market  American 
products  abroad,  such  as  the  Pillsbury-Washburn  Mill- 
ing Company  of  Minneapolis,  whose  exports  of  flour 
nearly  equal  those  of  all  other  American  mills  together, 
and  whose  controlling  managers  have  flatly  refused  all 
the  blandishments  of  the  trust  promoters,  As  to  others, 
we  cannot  do  better  than  quote  the  following  letter  from 
one  of  the  editors  of  the  Philadelphia  Evening  Tele- 
graph: 

PHILADELPHIA,  OCTOBER  4,  1899. 

Dear  Gen.  Nettleton:— In  reply  to  your  letter  of  the  29th  ult., 
permit  me  to  say  that  none  of  the  great  industrial  establishments 
in  Philadelphia  engaged  in  contracts  for  foreign  countries  are 
connected  with  trust  organizations,  unless  the  shipments  of  the 
Standard  Oil  Company  from  this  port  be  credited  to  that  account. 
The  Baldwin  Locomotive  Works,  whose  engines  now  go  to  nearly 
all  parts  of  the  globe,  is  simply  a  joint  stock  concern,  standing 
alone,  with  no  entangling  alliance.  The  Cramp  Ship  and  Engine 
Building  Company,  with  $9,000,000  of  foreign  contracts  now  on 
hand,  is  similarly  independent.  The  Disston  Saw  Works,  whose 


66  TRUSTS  OR  COMPETITIONt 

annual  trade  of  $10,000,000  is  largely  foreign,  has  no  connection 
with  any  other  house,  being  owned  and  controlled  by  the  Disston 
family.  The  Pencoyd  Iron  Works,  builders  of  the  great  Atbara 
bridge,  in  the  Soudan,  for  the  English  government  and  in  com- 
petition with  the  bridge-building  firms  of  Great  Britain,  Is 
so  far  absolutely  alone.  Trusts  do  not  flourish  in  this  town. 

Yours  truly, 

JOHN  V.  SEARS. 

Of  course,  a  part  of  our  increase  of  exports  has  natu- 
rally come  from  trust  organizations,  but,  as  is  seen,  much 
more  has  come  from  those  large  individual  establish- 
ments which  have  no  taint  whatever  of  the  monopoly 
element  about  them.  The  much-quoted  agency  of  the 
Standard  Oil  Trust  in  swelling  our  foreign  trade  has 
little  bearing  on  the  present  controversy.  That  concern, 
by  reason  of  its  pipe-line,  tank  and  transportation  sys- 
tems, has  become  practically  a  natural  monopoly,  like  a 
railway,  and  is  in  several  other  respects  wholly  differen- 
tiated from  the  latter-day  trusts  now  on  trial  before  the 
country  and  which  usually  have  no  such  excuse  for  being. 
In  a  word,  great  corporations  or  firms,  having  adequate 
capital  and  modern  plants  and  management,  yet  having 
no  affiliation  with  any  trust  and  no  itch  for  monopolistic 
power,  can  do  and  are  doing  for  our  foreign  trade  all 
and  more  than  the  trust  can  legitimately  accomplish. 

Second,  the  ethical  side.  If,  as  claimed,  in  order  to 
"vanquish"  foreign  manufacturers  by  underselling  them 
in  their  home  markets,  thus  driving  them  to  the  wall  and 
bringing  distress  to  whole  communities  of  our  neighbors 
over  sea,  it  is  necessary  to  subject  our  own  industries  to 
bondage  and  build  up  an  unfair  competition  abroad  on 
an  unfair  monopoly  at  home,  then  the  result  is  not  worth 
the  price.  Every  manly  community,  domestic  and  for- 
eign, will  expect  to  face  fair  competition  and  take  the 
consequences,  but  an  American  monopoly  trust,  if  it 
possesses  the  advantages  it  claims,  is  playing  the  com- 
petitive game  with  loaded  dice. 


THE  ARGUMENT  AGAINST  THE  TRUST.  67 

IV.    EFFECT  ON  TOWNS,  FARMS  AND  LABOR. 

Even  if  in  every  other  respect  the  justification  of  the 
trust  were  complete  and  triumphant,  the  natural  and 
necessary  effect  of  that  system  on  the  villages,  towns  and 
smaller  cities  and  on  the  farm  life  of  this  country  would 
compel  its  condemnation.  It  is  not  necessary  to  draw  an 
imaginary  picture  of  dismantled  factories,  idle  workmen, 
grass-grown  streets  and  weed-grown  farms.  It  is  suffi- 
cient to  apply  common  knowledge  and  common  sense 
to  the  problem  and  accept  the  results,  be  they  favorable 
or  unfavorable  to  any  theory. 

Authorities  estimate  that  with  no  check  to  present 
tendencies,  within  the  first  quarter  of  the  twentieth 
century  one-half  our  population  will  be  living  in  towns  of 
more  than  5,000  people.  Of  those  engaged  in  farming  a 
very  large  proportion  will  then  more  than  ever  be  de- 
pendent for  their  income  and  prosperity  upon  their 
proximity  to  these  groups  and  centers  of  population.  The 
absolutely  vital  importance  to  the  entire  republic  of  a 
continuance  of  fairly  favorable  conditions  for  our  town 
populations  everywhere,  becomes  too  plain  for  debate. 
It  is  fair  to  assume  that  the  trust  system,  unless  checked 
by  law,  will  absorb  what  few  manufacturing  industries 
are  still  outstanding  and  of  sufficient  importance  to  at- 
tract the  attention  of  the  professional  promoter.  What, 
then,  may  our  towns  and  minor  cities  reasonably  expect 
under  the  new  conditions? 

THE  TOWN  AND  THE  FACTORY. 

(1)  Practically  no  new  manufacturing  plant  can  be 
started  in  any  town  at  the  initiative  of  its  citizens  in  a 
line  of  industry  which  is  controlled  by  a  trust.  The  full 
meaning  of  this  tremendous  fact  cannot  be  sensed  with- 
out recalling  the  process  by  which  the  average  town  and 
city  have  been  founded,  fostered  and  developed.  In 
nearly  all  cases  where  any  considerable  growth  has  been 


68  TRUSTS  OR  COMPETITION? 

reached,  the  local  factory  has  been  the  nucleus  around 
which  much  of  that  growth  has  centered.  To  secure,  one 
after  another,  additional  manufacturing  plants  has  been 
the  abiding  and  never-sleeping  ambition  of  every  Ameri- 
can town  worthy  of  a  place  on  the  map,  and  the  struggles 
entered  upon  and  the  repeated  sacrifices  made  by  all 
classes  to  achieve  this  end  are  evidence,  both  of  the 
civic  enterprise  of  the  people  and  of  the  over-shadowing 
importance  attached  by  them  to  the  building  up  at  home 
of  thriving  and  permanent  manufacturing  industries. 
This  process  of  promoting  urban  growth  by  encouraging 
the  starting  of  new  factories  and  local  industries  has 
continued  up  to  the  present  time,  rivalry  between  adja- 
cent towns  in  this  respect  often  becoming  the  chief  ex- 
citement of  the  community.  It  may  be  broadly  stated 
that  the  thrift  and  importance  of  our  towns  have  been 
in  proportion  to  their  success  in  starting  or  attracting 
and  retaining  manufacturing  plants,  and  the  future  can 
be  judged  by  the  past.  The  fact  is  sufficiently  startling 
that  the  citizens  of  a  town  are  henceforth  virtually  pre- 
cluded from  themselves  starting  a  new  factory  in  any 
important  industry.  But  this  sharp  and  ominous  dis- 
ability will  be  partially  compensated  for  if  the  trusts  can 
be  relied  on  to  do  in  future  what  local  enterprise  has 
done  in  the  past.  Let  us  see: 

(2)  If  any  existing  trust  were  now  organizing  and 
starting  its  particular  industry  from  the  foundation  it 
certainly  would  not  scatter  that  industry  in  a  score  of 
plants  throughout  a  dozen  states.  If  the  industry  is  to 
have  one  ownership  and  one  management  then  such  an 
aimless  distribution  is  unnatural  and  uneconomic.  Some 
exceptions  to  this  rule  would  suggest  themselves  where 
bulky  raw  material  partially  governs  factory  location, 
but  for  the  most  part  the  foregoing  statement  is  obviously 
true. 


EFFECT   ON   COUNTRY   TOWNS.  69 

CONCENTRATION  AND  EASTWARD  MOVEMENT  OF  FACTORIES. 

(3)  Almost  uniformly  the  trusts  are  owned  and 
controlled  east  of  the  Alleghenies.  Their  managers  live 
there.  From  the  moment  that  a  trust  takes  over  a  unified 
industry  a  process  of  natural  selection  begins  and  pro- 
ceeds, not  perhaps  from  any  definite  previous  purpose, 
but  inevitably.  The  mere  fact  of  centralized  ownership 
will  naturally  lead  each  trust  gradually  to  concentrate 
its  manufacturing  activity  within  geographical  limits 
easily  accessible  from  the  headquarters  of  the  trust. 
When  it  becomes  necessary  or  expedient  to  close  or  dis- 
mantle one  of  several  factories  belonging  to  a  trust,  other 
things  being  equal  one  will  be  selected  for  sacrifice  most 
remote  from  the  center  of  operations.  When  there  is 
occasion  to  build  new  factories  or  enlarge  existing  ones 
this  increase  of  capacity  will  also  quite  as  naturally 
take  place  within  a  moderate  radius  of  the  central  office. 
When  a  factory  at  a  distance  from  the  trust's  headquar- 
ters is  destroyed  by  fire  or  otherwise,  it  will  be  rebuilt, 
if  at  all,  as  part  of  the  central  group,  and  not  in  the  town 
where  formerly  situated.  This  tendency  will  be  acceler- 
ated by  two  important  and  perhaps  valid  considerations: 
First,  public  sentiment  toward  trusts  in  the  West  and 
South,  and  indeed,  in  country  districts  generally,  is  such 
that  trust  owners  would  rather  have  their  plants  and 
other  assets  nearer  home.  Second,  the  immediate  vicin- 
ity of  a  great  financial  and  industrial  center  with  its 
abundant  banking  and  transportation  facilities,  its  labor 
supply  and  its  opportunities  for  personal  conference  be- 
tween managers  of  departments  and  of  different  but 
affiliated  or  friendly  trusts  must  have  strong  attractions 
for  these  great  industrial  aggregations.  Not  that  a  great 
city  is  itself  an  inviting  field  for  large  manufacturing 
plants.  Rents  and  taxation  are  too  high  for  this.  But 
the  hamlets  just  outside  the  corporate  limits  of  a  metrop- 
olis furnish  almost  ideal  manufacturing  conditions. 


70  TRUSTS  OR  COMPETITlONt 

Rents,  taxation  and  the  cost  of  living  are  relatively  low, 
while  transportation  facilities  and  freight  tariffs  are  usu- 
ally the  same  as  for  the  city  itself,  and  with  fast  subur- 
ban trains  and  the  telephone  all  the  advantages  of  the 
city  will  be  enjoyed,  coupled  with  about  all  the  well- 
known  advantages  of  the  country  town  as  a  manufactur- 
ing site.  The  element  of  bonuses,  partial  exemption  from 
taxation,  and  other  local  aids  which  towns  in  their  strug- 
gle for  existence  have  hitherto  employed  as  a  means  of 
influencing  the  location  of  new  manufacturing  plants 
will  naturally  have  little,  if  any,  influence  with  the  trusf, 
particularly  when  weighed  against  the  benefits  of  geog- 
raphical centralization.  Whatever  exceptions  may  occur 
to  this  rule,  the  broad  statement  is  certainly  incontro- 
vertible that  a  trust  owned  at  the  East  will  not  scatter 
new  factories  throughout  the  Central,  Western  and 
Southern  states. 

If  this  diagnosis  is  correct,  and  it  can  scarcely  be 
otherwise  unless  human  nature  has  changed  with  the 
coining  of  the  trust,  then  not  only  will  a  stop  be  put  to 
the  erection  of  important  new  factories  at  points  distant 
from  great  centers  of  population  or  of  established  indus- 
tries, but  by  a  steady  process  of  elimination,  already  be- 
gun, a  large  part  of  the  manufacturing  activity  now  dis- 
tributed among  thriving  towns  will  be  transferred  east- 
ward, or  to  the  environs  of  the  greatest  cities  more  cen- 
trally located.  And  one  leading  interest  in  a  place  can- 
not be  greatly  crippled  without  all  other  interests  suffer- 
ing correspondingly.  To  what  extent  this  blight  of 
American  towns  will  be  realized,  every  citizen,  knowing 
the  underlying  facts  and  fairly  familiar  with  the  out- 
working of  self-interest,  will  judge  for  himself. 

TRUSTS   AND  THE   FARMER— THE   NEW   SECTIONALISM. 

As  to  the  interests  of  the  farmer,  more  specifically: 
As  already  suggested,  the  farmers  who  live  within  a 
moderate  radius  from  thrifty  towns  have  hitherto  de- 


THE  INTERESTS  OF  THE  FARMER.  71 

pended  upon  such  near-by  centers  as  their  only  market 
for  selling  such  farm  products  as  will  not  bear  shipment 
a  considerable  distance;  for  example,  hay,  straw,  coarse 
and  quickly  perishable  vegetables,  fire  wood,  dairy  prod- 
ucts, etc.  To  whatever  extent  the  towns  are  depopulated 
or  industrially  depressed,  to  that  extent  this  important 
element  of  prosperity  for  the  farmer  is  destroyed  or 
impaired.  This  interest  does  not  appear  in  census  re- 
ports, and  is  scarcely  susceptible  of  being  treated  statis- 
tically, but  anyone  who  is  at  all  conversant  with  our 
average  farm  life  will  give  it  great  weight.  The  political 
gospel  of  a  protective  tariff  has  largely  obtained  its  wide 
and  continuing  acceptance  in  the  North  and  West  be- 
cause it  has  magnified  and  emphasized  the  importance 
of  a  home  market,  illustrated  by  the  picture  of  the  fac- 
tory near  the  raw  material,  the  industrial  village  near 
the  farm,  with  mutual  interchange  of  benefits  between 
the  two.  What  becomes  of  this  theory  under  the  reign 
of  the  trust? 

But  the  fundamental  wrong  visited  upon  the  Ameri- 
can farmer  by  the  trust  system  is  this:  The  farmer  pro- 
duces and  sells  raw  material.  He  is  rightly  interested  in 
selling  his  product  at  the  highest  price  and  buying  his 
commodities  at  the  lowest  price  that  fair  and  natural 
economic  conditions  will  warrant.  The  trust  system 
brings  in  unfair  and  uneconomic  market  conditions  in 
both  directions.  All  authorities  agree  to  the  soundness 
of  this  double  proposition:  When  all  buyers  combine, 
or  there  is  but  one  buyer,  and  sellers  compete,  the  sell- 
ers get  the  lowest  possible  price  for  what  they  sell.  When 
all  sellers  combine,  or  there  is  but  one  seller,  and  buyers 
compete,  buyers  pay  the  highest  possible  price  for  what 
they  buy. 

Apply  this  to  the  case  of  the  trust  and  the  farmer. 
For  practical  purposes  the  monopoly-trust  is  the  only 
buyer  of  raw  material  for  its  particular  line  of  industry, 
while  farmers  always  and  unavoidably  compete  with 


72  TRUSTS  OR  COMPETITION f 

each  other  in  selling — hence,  the  lowest  possible  price 
is  received  by  the  farmer.  On  the  other  hand,  in  the  na- 
ture of  the  case  the  trust  is  the  only  seller  of  the  manufac- 
tured article  in  its  line,  while  all  farmers  and  other  con- 
sumers compete  in  buying;  result,  the  highest  possible 
price  is  paid  by  the  farmer  for  what  he  buys  of  trust- 
made  goods.  The  effect  of  this  economic  law  can  only  be 
modified  in  the  present  case  by  supposing  that  the  trusts 
will  be  able  to  cheapen  cost  of  manufacturing  their  wares 
and  then  will  benevolently  sell  them  to  consumers 
at  prices  as  low  as  would  have  prevailed  under  open  com- 
petition. There  is  no  warrant  whatever  for  believing  or 
expecting  that  this  supposition  will  be  realized.  The  only 
qualifying  factor  will  be  the  very  moderate  effect  of  for- 
eign competition  carried  on  in  spite  of  the  tariff. 

It  is  useless  to  blink  the  patent  fact  that  the  present 
trust  movement,  and  particularly  the  phase  of  it  affecting 
the  welfare  of  farms  and  towns  and  the  open  door  of  op- 
portunity for  young  men,  cannot  fail  to  revive  and  in- 
tensify sectional  prejudice  against  the  East.  No  matter 
how  illogical  and  unfair  this  may  seem,  the  fact  has  to 
be  reckoned  with  by  any  citizen  who  really  tries  to  be 
candid  with  himself  and  with  the  problem  in  hand.  It 
would  be  disastrous  if  the  closing  of  one  gulf  of  section- 
alism should  be  followed  by  the  opening  of  another. 

LABOR  AND  THE  TRUSTS. 

If  the  reasoning  from  known  facts  in  previous  por- 
tions of  this  argument  is  sound  then  wage  earners  as  a 
class,  particularly  in  the  central,  western  and  southern 
states,  cannot  fail  to  be  injuriously  affected  by  the  new 
monopoly  system.  There  is  no  disposition  to  magnify  this 
feature,  nor  even  to  dwell  upon  it  unduly,  but  whatever 
conclusions  are  clearly  indicated  by  undisputed  condi- 
tions and  tendencies  should  not  be  timidly  avoided.  If 
the  colossal  mistake  embodied  in  the  trust  system  is  to 
be  corrected  the  co-operation  of  workingmen  is  impor- 


TRUSTS  AND  THE  WORKWOMAN.  73 

tant  to  that  end  and  they  cannot  become  too  intelligent 
regarding  it.  They  will  form  their  own  opinions  of  the 
considerations  here  presented,  for  they  have  acquired  the 
habit  of  doing  their  own  thinking  and  those  considera- 
tions have  only  so  much  of  authority  as  they  have  of 
reasonableness. 

Such,  then,  is  the  solidarity  of  our  modern  life  that 
serious  misfortune  or  derangement  cannot  overtake  the 
community  without  distributing  its  unhappy  effects 
among  all  classes.  If  the  monopoly-trust  system  is  in 
fact  a  fundamental  and  far-reaching  wrong  to  society, 
workingmen  will  be  among  the  earliest  and  severest  suf- 
ferers from  that  wrong,  for  they  have  less  of  a  barrier 
between  themselves  and  economic  harm  than  any  other 
class.  They  usually  have  no  buffer  of  accumulated  means 
with  which  to  soften  the  impact  of  disaster.  Dislodge- 
inent  or  grave  derangement  in  the  field  of  employment 
finds  them,  as  a  rule,  with  no  resources  to  fall  back  upon, 
no  plank  between  themselves  and  the  sea.  The  considera- 
tions already  presented  under  the  head  of  "Effects  on 
Towns  and  Farms"  would  seem  to  apply  with  almost 
equal  force  to  labor.  Any  economic  policy  which  can 
have  the  effect — which  puts  it  into  the  power  of  any  set 
of  men  to  produce  the  effect — there  suggested  on  the 
manufacturing  interests  of  practically  all  towns,  cannot 
be  other  than  disastrous  to  the  workingmen  whose  homes 
and  employments  are  in  those  towns.  It  is  not  necessary 
to  assume  that  in  those  factories  that  shall  finally  be 
maintained  by  the  trusts  wages  will  be  seriously  cut 
or  unusual  despotism  practiced.  There  seems  to  be  no 
good  reason  to  expect  such  results,  although,  as  Mr.  Dill 
suggests,  many  of  the  overcapitalized  trusts  will  need  to 
save  in  wages  account  as  well  as  everywhere  else  in  order 
to  pay  dividends  on  fictitious  securities.  The  labor 
unions  can  perhaps  be  trusted  to  look  after  this.  Many 
believe  there  is  more  reason  to  expect  alliances  between 
the  trusts  and  their  workmen,  along  the  line  of  the  Smith 


74  TRVSTS  OR  COMPETITION? 

associations  in  England.  Still  the  fact  has  weight  that 
when  one  corporation  is  the  only  employer  of  labor  in  a 
given  industry  it  has  tremendous  squeezing  power  over 
the  wage-earners  if  it  chooses  to  exert  it.  But  it  is  in  the 
cessation  of  factory  building  in  the  great  agricultural 
states  and  in  the  progressive  massing  of  manufacturing 
industries  in  eastern  and  central  locations  that  the 
gravest  danger  to  workingmen  is  to  be  looked  for.  The 
dismantling  of  a  western  factory  can  be  accomplished 
by  a  telegram.  It  takes  longer  for  the  discharged  work- 
man and  his  household  to  adjust  themselves  to  the  new 
emergency. 

There  is  another  peril,  and  it  is  suggested  by  the 
actual  policy  of  at  least  one  notable  trust,  which  is  old 
enough  to  have  developed  its  permanent  course.  We 
refer  to  the  lowering  of  the  class  and  type  of  workmen 
to  be  employed  by  the  mammoth  new  concerns — the 
degradation  of  American  labor  and  citizenship.  Natur- 
ally one  would  look  to  the  great  industries  of  America  as 
the  fit  field  in  which  intelligent  American  artisans  are 
to  earn  the  living  and  culture  of  themselves  and  their 
families.  But  if  with  the  coming  of  the  monopoly-trust 
and  an  enlarged  foreign  trade  the  only  consideration  is 
to  be  the  lowest  possible  cost  of  production  on  the  largest 
possible  scale,  it  is  not  unlikely  we  may  see  "wealth  ac- 
cumulate but  men  decay."  Mr.  Havemeyer,  of  the  Sugar 
Trust,  in  his  testimony  before  the  Industrial  Commission 
in  August,  1899,  said  that  five  sugar  refineries  were  now 
doing  the  work  formerly  accomplished  by  eighteen,  and 
that  the  trust  employs  about  25,000  men,  "mostly  Poles 
and  Bohemians,  because  cheaper."  On  the  same  occasion 
Mr.  Havemeyer  finished  this  attractive  picture  with  this 
master  touch:  "I  don't  care  two  cents  for  your  ethics — 
I'm  in  this  for  business."  To  what  extent  will  it  seem 
expedient  to  other  trusts  than  Mr.  Havemeyer's  to  con- 
centrate their  manufacturing  capacity  in  four  or  five 
great  plants  on  the  Atlantic  seaboard  and  then  man  them 


THE  TOUNO  MAN  AND   THE   TRUST.  75 

with  low-grade  and  easily  imported  European  labor, 
"mostly  Poles  and  Bohemians,  because  cheaper?"  The 
open  door  of  opportunity  is  quite  as  important  to  the 
American  workman,  his  son  and  his  daughter,  as  it  is  to 
any  other  class. 

V.    THE  DOOR  OF  OPPORTUNITY. 

At  the  time  of  its  first  utterance  a  great  and  reas- 
suring truth  was  embodied  in  the  expression,  "The  Re- 
public is  Opportunity."  To  an  extent  that  approaches 
the  calamitous  the  meaning  in  that  phrase  is  threatened 
with  impairment  by  the  pending  revolution.  A  large  sec- 
tion of  the  generation  of  young  men  now  facing  the 
twentieth  century  will  find  themselves  disinherited  of  op- 
portunity if  the  trust  system  succeeds  in  establishing 
its  principle  of  private  monopoly,  and  in  holding  the  do- 
main it  has  seized.  Our  Western  frontier  has  now 
reached  the  Pacific;  our  habitable  lands  are  practically 
occupied,  or  appropriated,  our  great  special  resources 
are  being  exploited  by  corporate  agencies.  By  the  in- 
evitable changes  resulting  from  settling  a  continent 
many  of  the  avenues  to  independent  pursuits,  which 
were  open  to  the  youth  of  thirty  and  fifty  years  ago,  are 
closed  to  the  youth  of  to-day.  All  the  more  important 
and  indispensable,  therefore,  were  those  remaining 
channels  of  activity  which,  instead  of  being  closed  by  the 
country's  development,  had  been  broadened  and  multi- 
plied— namely,  the  nation's  diversified  industries  and  the 
honorable  pursuits  allied  to  them.  To  these  an  ever-in- 
creasing number  of  our  young  men  looked  for  a  chance 
in  life,  and  an  ultimate  satisfactory  career.  The  trust 

The  effect  of  overcapitalization  in  the  first  place  Is,  to  do  exactly  what 
has  been  claimed  by  the  labor  men.  Because  of  overcapitali/ation  the 
companies  have  got  to  report  to  artificial  means  to  pay  dividends  and  so 
are  compelled  to  put  prices  up  and  put  wages  down.  Every  director  takes 
pride  in  the  fact  that  his  company  pays  dividends,  and  to  pay  dividends 
on  inflated  capital  they  have  got  to  take  money  from  some  place  from 
which  they  ought  not  to  take  it— from  consumers  through  high  prices  and 
from  labor  through  lowered  wages.— James  B.  Dill,  addressing  the  Chi- 
cago Trust  Conference. 


76  TRVSTS  OR  COMPETITION* 

system  in  its  logical  result  shuts  this  door  of  opportunity 
in  the  faces  of  our  sons. 

It  is  replied  that  as  many  persons  as  ever  will  be 
required  to  man  an  industry  under  the  new  system. 
Yes,  as  permanent  wage-earners  and  clerks,  not  as  ambi- 
tious employes,  who  may  reasonably  aspire  to  become 
employers  and  associate  proprietors.  It  is  further  said 
that  a  young  fellow  who  has  it  in  him  to  rise  will  find  his 
way  upward,  that  the  meritorious  will  make  an  oppor- 
tunity for  themselves.  But  a  chief  indictment  of  the 
trust  system  and  principle  is  that  they  take  away  the 
opportunity  for  making  an  opportunity.  A  foothold  is 
necessary  to  one  who  would'  lift  himself.  The  foothold 
has  been  removed  in  a  wide  part  of  the  field.  What 
promising  young  man  is  ever  again  heard  of  after  he  has 

"The  present  situation,  to  the  good  citizen,  the  good  Republican,  and 
the  man  who  loves  his  country,  is  really  alarming,  and  it  is  more  largely 
owing  to  the  rapid  formation  of  what  are  called  trusts  than  to  any  other 
agency.  This  trust  craze  has  changed  the  whole  nature  of  doing  things." 

Thus  spoke  to-day  ex-United  States  Senator  William  D.  Washburn  of 
Minnesota,  head  of  the  extensive  flour  milling  interests  in  Minneapolis, 
in  an  interview  with  a  New  York  Tribune  reporter,  Mr.  Washburn  sig- 
nificantly added. 

"When  I  was  a  young  man— I  am  now  68—  I  had  the  world  before  me, 
and  there  was  absolutely  a  fair  field  for  me.  Take  all  of  our  most  suc- 
cessful business  men  of  to-day  and  their  experiences  were  like  mine. 
They  entered  the  race  without  a  handicap,  and  their  grit  and  capacity 
won.  Now  this  building  up  of  trusts  puts  a  stop  to  fair  and  equal  op- 
portunities for  the  young  men  of  to-day.  The  young  man  just  out  of 
college  has  no  opening,  as  a  rule.  He  cannot  begin  business  on  his  own 
account  against  organized  capital.  He  must  join  the  procession.  He  must 
content  himself  with  being  a  mere  clerk,  and  the  chances  are  that  he  will 
never  get  any  further,  because  there  are  so  many  in  his  class.  This 
makes  the  situation  a  serious  one,  and  I  am  sorry  for  the  young  man  of 
to-day.  I've  studied  the  situation  and  I'm  sure  of  what  I  am  saying."— 
Chicago  Times-Herald.  Sept.  11,  1899,  p.  5. 

On  the  other  hand  Professor  Gunton  takes  an  optimistic  view  of  the 
opportunities  of  young  men  under  the  reign  of  the  trust.  In  his  magazine 
for  October,  1899,  be  says  in  this  regard: 

The  empty-handed  country  youth  comes  to  the  city  for  his  opportunity. 
He  can  do  nothing  at  home;  get  nowhere.  He  becomes  a  clerk  or  opera- 
tive in  the  employ  of  a  corporation.  He  can  study,  prepare  himself,  ob- 
serve his  surroundings  and  chances,  and  lay  up  money.  Gradually  such 
an  one  wins  promotion,  or  If  he  finds  some  different  and  special  bent  and 
has  it  in  him  to  rise,  he  will  and  does  strike  out  and  succeed.  If  he  lacks 
any  particular  force  or  genius,  his  clerkship  is  the  best  place  for  him. 
The  world  is  not  closed  to  talent;  it  is  urgently  demanding  it,  and  the 
only  real  complaint  that  holds  good  is  the  scarcity  of  exceptional  merit. 


THE  DOOR  OF  OPPORTUNITY.  77 

entered  the  comfortable  employ  of  the  Standard  Oil 
Trust?  He  is  bottled  up. 

The  fact  should  not  be  omitted  (though  the  abuse  is 
not  peculiar  to  the  trust  system,  except  in  extent),  that 
in  most  of  these  great  aggregations,  where  because  of 
mere  size  the  real  managers  cannot  be  in  personal  touch 
with  many  employes,  a  special  and  vicious  form  of 
nepotism  and  favoritism  prevails  in  the  matter  of  getting 
positions.  It  first  includes  the  sons  in-law  and  nephews 
of  leading  owners  and  officials,  then  the  social  cronies  of 
these,  and  finally  an  outer  circle,  comprising  the  cronies 
of  the  cronies.  It  is  sometimes  not  an  easy  matter  for 
even  a  brainy  and  forceful  young  fellow,  if  he  have 
neither  a  "push"  nor  a  "pull,"  to  break  through  this  triple 
line.  Of  course,  all  grades  of  efficiency  are  represented 
by  these  semi-favorities,  and  it  is  fair  to  say  that,  in  most 
instances,  when  once  employed  they  find  their  level  by 
merit,  or  demerit,  and  the  fittest  survive. 

What  is  herein  said,  concerning  the  probable  effect 
of  the  trust  movement  on  American  towns  and  farms,  ap- 
plies with  special  force  to  this  matter  of  opportunities 
for  young  men.  The  country  town,  minor  city  and  the  ad- 
jacent farm  are  the  usual  starting  places  for  the  men  who 
subsequently  lead  events  in  the  metropolis.  They  are 
the  nurseries  of  forceful  character.  Leaders  of  men  are 
seldom  born  and  reared  in  large  cities.  What  hereafter 
will  be  the  opportunities  of  aspiring  lads,  reared  in  and 
near  the  average  country  town?  It  is  already  a  common 
remark  with  business  and  professional  men  who  them- 
selves succeeded  under  conditions  now  fast  passing  away, 
"I  am  wholly  at  a  loss  what  to  advise  my  son  to  do." 
To  what  extent  our  new  tropical  possessions  may  open 
new  avenues,  at  the  cost  of  exile,  remains  to  be  seen. 

And  this  closing  of  avenues  to  honorable  business 
careers  is  scarcely  the  most  serious  consideration  under 
this  head.  Unless  the  leopard  is  to  change  his  spots  and 
human  nature  suddenly  become  regenerate,  the  trust  and 


78  TRUSTS  OR  COMPETITION? 

the  associated  trusts  will  have  a  final  word  to  say  as  to 
the  political  career  of  any  rising  young  man  who  prom- 
ises to  have  aggressive  influence  in  civic  affairs.  Their 
heavy,  though  often  invisible,  hand  will  be  everywhere 
present  in  political  events.  As  Senator  Chandler  says  in 
his  letter,  given  elsewhere  in  this  book,  "No  young  man 
can  rise  in  his  political  party,  become  a  local  party  leader 
or  aspire  to  public  office  until  he  has  given  the  trusts  to 
understand  that  he  will  not  seriously  exert  himself  to 
harm  them."  The  spectacle  of  the  Sugar  Trust  in  the 
United  States  Senate  is  grim  advance  confirmation  of 
this  prediction. 

In  a  word,  so  far  as  lies  in  the  trusts  with  their 
scores  of  industries  absorbed  and  more  in  waiting,  and 
their  billions  of  capitalization,  it  is  no  longer  true  that 
"The  Republic  is  Opportunity." 

COMPETITION— ACTUAL,    POTENTIAL    AND    SPURIOUS. 

After  the  champions  of  the  trust  have  been  led  to 
understand  that  the  only  trusts  which  the  people  are 
talking  about  are  the  monopoly-trusts,  and  not  at  all 
those  "large  corporations,"  which  are  engaged  in  a  legiti- 
mate competitive  business,  they  proceed  to  defend  private 
monopolies  on  the  ground  that  their  self-interest  and 
safety  will  lead  and  compel  them  to  sell  to  consumers 
at  prices  reasonably  low  so  as  not,  by  a  show  of  high 
profits,  to  tempt  outside  capital  and  skill  to  start  com- 
peting plants.  This  desire  of  outsiders  to  break  into  the 
preserve  of  the  industrial  monopoly  is  called  potential 
competition,  and  it  is  admitted  that,  in  the  absence  of 
laws  which  do  not  now  exist,  this  will  be  the  only  barrier 
to  protect  the  people  against  excessive  prices  and  other 
abuses  at  the  hands  of  the  trusts. 

What  sufficient  force  is  there  in  this  argument? 

It  is  evident  to  all  without  consulting  the  political 
economists  that  where  there  is  a  constant  and  imminent 
probability  of  new  competitors  springing  up  in  case  ex- 


AS  TO  POTENTIAL  COMPETITION.  79 

isting  manufacturers  fix  and  hold  their  prices  at  too 
high  a  level,  this  fact  has  some  deterrent  effect  on  the 
latter,  and  hence  furnishes  some  protection  to  the  public 
in  case  of  virtual  monopoly  of  any  industry.  This 
is  all  that  can  safely  be  admitted.  On  the  other 
hand,  in  no  case  can  this  protection  be  such  as  to  make  a 
permanent  private  monopoly  either  safe  or  tolerable. 
In  a  majority  of  instances  causes  to  be  named  will  prevent 
this  element  from  having  any  considerable  protective  ef- 
fect within  limits  that  would  make  it  of  material  value  to 
consumers.  In  normal  circumstances,  when  social  and 
economic  forces  have  proper  play,  potential  competition 
is  an  important  factor;  but  under  the  artificial  and  anoma- 
lous conditions  of  the  monopoly-trust  tolerated  by  law, 
that  factor  disappears  or  loses  most  of  its  vigor.  Society 
has  had  absolutely  no  experience  with  a  condition  of 
things  resembling  that  which)  will  prevail  as  soon  as  the 
new  monopoly  system  feels  itself  safe  in  the  saddle;  and 
in  regard  to  this  matter  of  potential  competition  econo- 
mists are  probably  too  optimistic  in  attempting  to  apply 
to  this  new  situation  the  maxims  and  knowledge  of  the 
past. 

When  once  an  entire  business  has  been  absorbed  by 
a  single  interest,  it  requires  either  great  courage  or  much 
foolhardiness  to  attempt  to  make  head  competitively 
against  it.  Capital,  if  not  timid,  is  usually  conservative, 
and  does  not  covet  the  uncertain  task  of  trying  to  start  a 
new  business  in  face  of  a  powerful  monopoly  controlling 
or  at  least  occupying  all  the  avenues  of  trade.  It  is  par- 
ticularly hazardous  and  difficult  (a)  when  the  enterprise 
requires  large  capital,  as  will  be  the  case  in  contending 
with  any  modern  monopoly  trust;  (b)  when  the  business 
itself  is  one  involving  considerable  risk;  (c)  when 
elaborate  equipment  is  required  which  is  slow 
and  costly  of  construction;  (d)  when  highly 
trained  experts  are  required.  After  the  trust  has  been 
running  long  enough  it  will  have  in  its  employ  about  all 


80  TRUSTS  OR  COMPETITION? 

the  available  and  satisfactory  talent  of  this  sort,  (e) 
When  the  trust  business  is  in  one  or  more  important  par- 
ticulars protected  by  patents  or  trade-marks,  and  this  is 
very  frequently  the  case  where  a  trust  has  gathered  in 
all  the  plants  of  an  industry. 

THE  GIANT  AND  HIS  CLUB. 

Thus  far  we  have  enumerated  only  those  obstacles 
to  new  competition  which  naturally  arise  in  the  course  of 
business  events,  and  are  largely  negative  or  passive  in 
their  nature.  It  remains  to  mention  the  principal  and 
most  conclusive  obstruction  in  the  path  of  the  would-be 
competitor  of  a  trust,  namely,  the  aggressive,  unscrupu- 
lous and  remorseless  campaign  of  the  trust  management 
to  circumvent,  defeat  and  destroy  any  real  competitor  who 
shows  his  head. 

Discriminating  railroad  rates  alone  would  go  far  to 
prevent  new  competition.  In  this  and  other  methods  of 
warfare  the  rule  of  commercial  morality  likely  to  govern 
the  average  trust  is  sufficiently  illustrated  in  the  outline 
of  the  Standard  Oil  episode  at  Marietta,  given  elsewhere 
herein.  The  weapon  of  discriminating  prices  is  not  less 
effective  than  that  of  discriminating  railroad  charges  and 
scarcely  less  unfair  when  practiced  by  an  unfair  mo- 
nopoly. When  the  trust,  doing  business  throughout  tbe 
whole  country,  can  sell  goods  below  cost  in  the  relatively 
local  field  of  any  rising  competitor,  while  itself  making 
profits  everywhere  else,  competition  is  next  to  impossible. 

Then,  after  a  monopoly-trust,  by  all  means  at  its  com- 
mand, has  driven  and  kept  competition  from  the  field  for 
a  considerable  time,  possible  competitors  are  apt  to  lose 
all  interest  and  alertness,  go  about  other  business  and,  to- 
gether with  the  general  public,  settle  down  to  the  conclu- 
sion that  the  trust  is  permanently  in  the  saddle  and  that 
any  further  thought  of  competing  is  idle.  Or,  if  per- 
chance a  competitor,  by  reason  of  strength,  becomes  for- 
midable after  years  of  battling,  it  will  usually  be  only  a 


THE   OIANT  AND   HIS    CLUB.  81 

question  of  price  for  the  trust  to  absorb  the  new  rival, 
and  then  will  follow  more  years  of  monopoly  and — 
peace!  In  fact,  this  whole  argumentative  fog  of  potential 
competition  can  best  be  illuminated  by 

AN    ECONOMIC    PARABLE. 

A  plentiful  Orchard  fairly  belonged  to  all  the  People 
and  they  had  been  accustomed  to  gather  the  Fruit.  One 
morning  in  Harvest  time  when  the  People  approached 
the  Gate  a  new  Giant  with  a  huge  Club  obstructed  the 
Entrance,  while  his  healthy  Children  busily  plucked  the 
fine  Apples  within  and  kindly  offered  them  for  Sale  to 
the  People  outside  at  the  cut  Price  of  one  Shilling  per- 
Apple.  On  being  remonstrated  with  by  the  waiting  Peo- 
ple and  charged  with  being  a  Monopolist,  the  Giant,  with 
winsome  Candor,  replied:  "Indeed,  I  and  my  Family 
are  no  Monopolists;  we  are  ourselves  much  harassed  by 
Potential  Competition,  since  you  are  all  quite  free  to 
enter  the  Orchard  and  compete — if — you — can — get — 
past — this — club — of  mine." 

Let  us  again  remind  ourselves  that  the  legal  right  to 
compete  has  little  economic  value  or  restraining  effect 
if  the  power  to  compete  is  lacking. 

FICTITIOUS  AND  TOLERATED  COMPETITORS. 

It  is  a  favorite  and  often  fairly  effective  device  of 
some  virtual  monopolies  to  leave  in  operation  a  few  minor 
independent  concerns.  This  is  supposed  to  accomplish  a 
double  purpose.  By  an  appearance  of  actual  competition 
it  serves  to  delude  and  pacify  the  public  by  concealing 
the  fact  of  substantial  monopoly,  to  temper  the  general 
criticism  encountered  by  all  monopolies  and  to  discour- 
age those  on  the  outside  who  are  looking  for  business 
openings  and  who  might  become  real  competitors.  No- 

Tbe  Tin  Plate  Trust  is  said  to  have  contracted  for  a  term  of  years  for  the 
entire  output  of  machinery  in  that  line  in  the  U.  S.  and  thus  to  have  forestalled 
any  would-be  competitor  who  might  be  tempted  by  the  present  exorbitant 
profits.  The  officers  of  the  trust  atate  that  this  Is  not  the  case. 

6 


82  TRUSTS  OR  COMPETITION? 

body  enjoys  doing  business  in  an  atmosphere  of  intense 
public  odium.  So  desirable  is  this  semblance  of  com- 
petition, especially  when  competitive  bids  are  called  for 
at  lettings  of  contracts,  that  "dummy"  competing  com- 
panies are  sometimes  organized  and  maintained  by  the 
monopoly  company.  Accordingly  the  average  trust  or- 
ganizer rather  prefers  to  have  from  five  to  fifteen  per 
cent  of  the  weaker  plants  representing  his  industry  left 
unabsorbed  by  the  trust,  and  this  is  commonly  done. 
Result:  The  trust  points  to  them  and  says,  "Observe 
that  we  are  not  only  held  down  to  low  prices  and  good 
behavior  by  potential  competition,  but  behold,  the  actual 
competition  is  on  our  backs."  Meanwhile  the  trust 
quietly  establishes  a  protectorate  over  its  harmless  com- 
petitors and  tacitly  agrees  to  tolerate  their  survival  so 
long  as  they  refrain  from  cutting  prices  and  enlarging 
capacity.  The  Standard  Oil  now  refines  82.3  per  cent 
of  American  petroleum,  whereas  in  1889  it  refined  but  75 
per  cent.  It  may  well  prefer,  for  appearance's  sake  that 
the  few  remaining  independent  refineries  should  continue 
in  business,  and  doubtless  shapes  its  policy  to  this  end, 
although  it  could  close  them  up  in  ninety  days. 

A   SYSTEM   OF    UNIVERSAL   PRIVATE   MONOPOLY. 

We  cannot  permit  the  system  of  private  monopoly 
as  embodied  in  the  trusts  to  survive  and  prosper  unless 
we  are  prepared  to  see  that  system  invade  every  field  of 
human  activity  where  it  can  be  made  profitable.  If  ac- 
cepted at  all  it  is  accepted  wholly.  It  involves  a  change 
of  the  principle  governing  the  business  relations  of  all 
men — not  simply  the  relations  between  certain  corpora- 

The  contention  that  the  trust  system  will  teiid  gradually  to  concen- 
trate factories  in  the  East  or  in  the  vicinity  of  great  cities  centrally 
located  needs  to  be  construed  in  the  light  of  the  obvious  fact  that  in  the 
case  of  heavy  goods  the  matter  of  freight  charges  will  permanently  com- 
pel some  distribution  of  plants  between  the  East  and  the  West.  But  this 
fact  will  not  prevent  the  progressive  removal  of  plants  from  country 
towns  and  the  smaller  cities  to  the  environs  of  the  largest  cities  in  the 
same  general  section. 


A  BLACKSMITHS'   TRUST.  83 

tions  and  the  public.  The  law  cannot  allow  the  giant 
monopoly-trusts  to  exist  and  at  the  same  time  attempt  to 
prevent  or  punish  small  monopolies,  combinations  and 
agreements  to  destroy  competition.  If  the  big  fish  are 
to  pass  at  pleasure  through  the  meshes  of  the  law  against 
monopoly,  the  little  ones  can  and  will  surely  follow 
through  the  opening.  In  every  domain  of  life  the  new 
oppression  will  confront  and  annoy.  The  bondage  will 
not  be  that  of  a  hundred  feudal  masters,  but  that  of  a 
thousand  petty  tyrants.  The  "combines"  of  the  butchers, 
the  bakers  and  the  candlestick-makers  will  emulate  the 
greater  trusts,  just  as  the  allied  plumbers  and  plumbing 
material  men  in  Chicago  have  already  done,  fix  prices  and 
regulate  the  citizen's  rights  at  their  will.  The  legal  wall 
against  monopoly  is  useless  against  small  monopolists, 
so  long  as  it  is  prostrate  in  front  of  the  great  ones.  A 
general  inundation  by  the  Mississippi  cannot  be  pre- 
vented by  attempting  to  maintain  an  effective  levee  along 
portions  of  the  river  while  there  is  no  barrier  at  the  most 
critical  points.  It  is  a  system  of  universal  private  mon- 
opoly that  we  are  invited  to  adopt. 

Already  the  advance  guard  of  this  incursion  of  monopolistic  vermin  is 
making  Its  appearance.  Two  examples  will  serve  where  twenty  could 
be  given:  The  Chicago  plumbers  and  the  dealers  in  plumbers'  material 
are  now  in  combination  and  prevent  auy  householder  from  buying  any 
article  of  plumbing  material,  and  hence  from  doing  any  repairs  for  hini- 
&elf.  A  house  builder  is  prohibited  from  using  any  plumbing  material 
he  may  have  on  hand,  but  must  buy  new  from  the  monopoly  dealer.  An- 
other sample  of  the  new  method  is  thus  editorially  stated  in  the  Chicago 
Tribune  for  November  23,  1899:  "The  situation  in  the  horseshoeing  in- 
dustry in  McLean  County,  Illinois,  is  typical  of  present  trust  methods. 
The  blacksmiths  and  horseshoers  of  that  county  met  Tuesday  and  or- 
ganized what  they  call  a  'county  protective  association,'  but  w'hich  is  in 
effect  a  trust.  They  have  adopted  a  new  scale  of  charges  that  provides  for 
an  increase  of  20  per  cent,  in  the  price  for  horseshoeing.  The  excuse 
given  for  the  increase  is  that  the  price  of  materials  has  been  raised  by 
the  manufacturers.  One  would  expect  that  the  maintenance  of  a  black- 
smiths' trust  would  be  difficult,  but  the  farriers  have  the  aid  of  the  manu- 
facturers in  carrying  out  their  plans.  The  hardware  association,  from 
which  they  buy  their  goods,  has  agreed  that  it  will  charge  a  prohibitive 
price  to  all  blacksmiths  and  horseshoers  who  are  not  members  of  the  as- 
sociation. The  result  will  be  that  the  public  will  be  forced  to  pay  the 
Increased  prices  and  possibility  of  competition  is  prevented." 


84  TRUSTS  OR  COMPETITION? 

MONOPOLYTRUSTS  AND  SOCIALISM. 

This  thought  is  crystallizing  in  the  minds  of  many 
American  citizens  to-day:  The  end  of  competition  will 
be  the  beginning  of  socialism,  in  some  form.*  There  is  no 
middle  ground  on  which  society  can  stand  for  a  day.  It  is 
like  the  meeting  of  the  land  and  the  sea;  as  the  shore  is. 
only  a  line  marking  the  point  where  the  one  leaves  off  and 
the  other  begins,  so  established  monopoly  will  be  the 
line  showing  where  competition  leaves  off  and  govern- 
ment ownership  begins.  No  people  of  Anglo-Saxon  line- 
age will  long  consent  to  live  under  conditions  imposed 
by  irresponsible  private  monopoly.  It  is  either  a  restora- 
tion of  economic  liberty,  or  monopoly  by  the  people,  for 
the  people.  If,  in  the  progress  of  human  society,  the  hour 
has  struck  when  socialistic  methods  must  needs  dis- 
place the  historic  order,  very  well ;  along  the  line  of  genu- 
ine evolution  the  inevitable  is  seldom  a  calamity.  But 
most  of  us  believe  that  no  such  epoch  is  at  the  door  un- 
less it  be  invited,  hastened  and  compelled  by  human  folly. 
And  this  is  the  crowning  offence  of  the  new  system  of 
monopoly-trusts,  that  so  far  as  in  it  lies  it  forces  society 
forward  before  the  time,  on  the  road  which  has  but 

"The  capitalist  and  captain  of  industry  in  these  later  days  has  set 
himself  to  demonstrate  that  the  theories  of  the  socialist  are  sound. 
After  some  centuries  of  adherence  to  the  principle  that  competition 
brings  the  best  results  and  the  greatest  progress  for  the  individual  and 
for  society,  suddenly  many  thousand  employers  and  capitalists  rush 
out  of  business,  give  up  the  positions  they  occupy  and  the  plants  they 
own  in  order  to  avoid  competition  and  set  themselves  to  prove  that 
society  can  1>e  best  and  most  cheaply  served  and  the  workers  and 
managers  from  highest  to  lowest  can  get  better  returns,  if  all  pro- 
ductive work  in  each  branch  is  performed  by  a  single,  centralized 
body,  controlling  wages  at  pleasure,  abolishing  agents  and  mkl.llemen, 
restrained  by  no  competition  and  responsible  only  to  society  as  a 
whole.  If  this  theory  be  true,  does  it  not  follow  as  a  matter  of  course 
that  society  as  a  whole  might  better  take  possession  of  the  plants  and 
control  the  business  and  absorb  for  itself  the  profits  of  production  or 
the  gains  by  cheapening  production  at  its  pleasure? 

If  the  modern  combination  proves  that  competition  is  no  longer  a 
benefit,  but  a  curse;  that  individual  struggling  for  success  is  no  longer 
needed  to  evolve  the  best  inventions  and  devices  to  bring  them  into 
use;  that  the  monster  corporation  can  work  more  cheaply,  and  at  the 
same  time  more  wisely  and  ably  in  handling  many  establishments  of 


A  STRIDE  TOWARD  SOCIALISM.  85 

one  ending.  It  is  not  difficult  for  the  thoughtful  to  con- 
cede that  present  social  arrangements  are  probably  not 
permanent,  but  if  we  are  to  escape  sharp  disaster  the 
preparation  for  the  new  social  dispensation  must  be  far 
more  gradual  than  the  trust-builders  seem  disposed  to 
permit.  They  would  scarcely  need  to  change  their 
course  or  modify  their  plans  if  they  really  wished  to  force 
the  American  people  to  choose  forthwith  between  the 
devil  and  the  deep  sea,  of  monopoly  on  the  one  hand  and 
socialism  on  the  other.  Leading  exponents  of  the  social- 
istic scheme  here  and  abroad  believe  their  day  is  dawn- 
ing and  they  look  to  the  monopoly-trust  movement  as  its 
harbinger. 

As  to  Trust  Prices. — The  question  whether  trusts 
will  ultimately  fix  prices  high  or  low  has  from  necessity 
been  discussed  incidentally  in  previous  portions  of  this 
argument.  Obviously  the  time  has  been  too  short,  and 
from  other  causes  the  recent  market  situation  has  been 
too  chaotic,  to  predicate  anything  of  present  trust  prices. 
All  prices  have  risen  sharply  during  the  main  develop- 
ment of  the  trust  movement,  but  only  here  and  there  can 
such  rise  be  clearly  and  fairly  traced  to  monopoly  influ- 

different  kinds,  far  apart  and  under  different  circumstances,  than  the 
individual  owners  who  have  created  them;  that  it  can  prevent  the 
frequent  stoppage  of  the  weaker  works,  while  the  stronger  continue 
to  thrive;  that  society  no  longer  needs  any  defense  against  monopoly, 
because  the  monopoly  must  always  cheapen  in  order  to  enlarge  busi- 
ness, and  that  workers,  consumers  and  employers  will  all  gain  by  elim- 
ination of  competition,  then,  indeed,  the  socialist  has  only  to  demand 
the  logical  completion  of  the  journey.  There  will  be  no  sense  in  leav- 
ing the  big  corporations  to  blunder  along,  sometimes  losing  and  some- 
times hurting  society  by  unwisdom,  when  society  itself  can  appropri- 
ate their  plants,  direct  their  labor,  make  and  bear  its  own  blunders 
and  pocket  its  own  gains. — New  York  Tribune,  April  27,  1899. 

The  thinking  socialists  of  to-day  approve  of  all  combinations  and 
trusts,  recognizing  the  obvious  fact  that  it  is  only  necessary  for  com- 
binations to  move  forward  to  bring  us  to  a  period  of  socialism.  This 
idea  Is  clearly  brought  out  in  Laurence  Gronlund's  "Danton  in  the  French 
Revolution."  A  political  economist  recently  remarked:  "If  I  were  a 
socialist  I  would  say  to  these  industrial  leaders,  'Keep  right  on,  gentle- 
men; you  are  realizing  for  me  my  dreams.  It  is  now  only  necessary  for 
me  to  fold  my  hands.'  "  Socialism  means  a  universal  trust.  Combine  all 
trusts  into  one  and  then  it  is  only  necessary  to  place  a  representative  of 
the  people  in  control  to  have  socialism  pure  and  simple.— Prof.  Richard 
T.  Ely  in  "Problems  of  To-day." 


86  TRUSTS  OR  COMPETITION? 

ence.  There  is  merit  in  the  contention  of  many  oppo- 
nents of  the  trust  that  this  subject  of  resulting  prices 
to  consumers  is  really  subordinate  to  many  others  that 
are  involved  in  the  trust  system,  much  as  this  claim 
may  surprise  or  amuse  gentlemen  who  have  become  ac- 
customed to  viewing  all  things  through  the  glass  of  a 
student  of  economics.  In  the  life  of  a  people,  as  of  an  in- 
dividual, a  hundred  occasions  arise  when  economic  con- 
siderations have  to  be  given  a  secondary  place  or  be 
wholly  ignored  in  order  that  more  fundamental  prob- 
lems, ethical,  political  or  sociological,  may  be  solved 
aright.  A  mere  assurance  to  the  community  of  some- 
what lower  prices  for  certain  commodities  would  be  a 
shabby  return  for  a  surrender  of  industrial  liberty — as 
though  the  state  should  tender  to  the  self-respecting  citi- 
zen free  board  if  he  would  consent  to  live  in  exile.  But 
the  trust  is  not  even  strong  on  the  sordid  or  mercenary 
side  of  the  argument.  Such  has  been  the  experience  of 
mankind  with  those  partial  and  temporary  monopolies 
which  have  hitherto  existed  that  the  term  "monopoly 
prices"  has  become  fixed  in  the  common  speech  of  the 
people  and  with  a  meaning  that  nobody  misundestands. 
Idioms  like  this  do  not  grow  out  of  nothing.  No  recog- 
nized and  disinterested  authority  has  yet  made  the  claim 
or  ventured  the  prediction  that  the  trusts,  when  settled 
in  the  saddle,  will  fix  prices  lower  than  they  would  be 
under  a  competitive  system.  Professor  Jenks  says  they 
could  do  so,  but  will  not.  The  only  question  among  the 
political  economists  is  how  far  above  a  competitive  level 
trust  prices  will  finally  be  held.  Even  those  writers  who, 
like  President  Hadley  as  quoted  herein,  take  the  most 
hopeful  view  of  the  situation,  only  venture  this  assur- 

Thc  fixing  of  prices  by  all  who  have  goods  to  sell  Is  for  the  purpose 
of  making  the  highest  possible  profit,  whether  monopoly  or  not.  The 
monopolist  puts  his  price  as  high  as  he  can  without  thereby  lessening 
the  demand  for  his  goods  more  than  enough  to.  counterbalance  his 
high  profits  *n  each  individual  sale.— Prof.  J.  W.  Jenks  in  Johnson's 
Cyclopedia. 


EFFECT  ON  PRICES.  87 

ance,  that  in  the-long  run,  after  the  trust  managers  have 
learned  wisdom  from  rough  experience,  "after  a  great 
many  legitimate  interests  are  sacrificed  in  the  process," 
and  after  making  full  allowance  for  potential  com- 
petition, trust  prices  will  range  above,  but  not  exorbi- 
tantly above,  the  level  at  which  fair  competition  would 
have  placed  them.  Professor  Jenks  says  the  same  thing 
in  different  language,  and  both  make  allowance  for  the 
prevalence  of  high  monopoly  prices  in  many  lines  and 
for  uncertain  periods  because  of  the  combined  greed  and 
suicidal  folly  of  some  trust  managers. 

It  is  not  improbable  that  even  this  rather  somber 
price  outlook  fails  to  reckon  with  one  important  factor: 
Society  has  had  absolutely  no  experience  with  a  gen- 
eral, solidified,  accepted  and  permanent  monopoly  sys- 
tem, such  as  our  trust  movement  is  or  aims  to  be,  and 
such  as  a  policy  of  public  toleration  will  permit  it  to 
become.  So-called  monopolies  of  the  recent  past  have 
been  only  apprentices,  tyros  in  the  art  compared  with 
the  new  arrival.  They  have  been  hampered  and  harassed 
at  every  turn  in  their  efforts  to  assert  and  confirm  their 
monopoly  advantage;  they  have  been  driven"  from  one 
illegal  refuge  and  expedient  to  another  by  the  law  offi- 
cers and  the  courts;  they  have  needed  to  conciliate  in 
order  to  survive;  they  have  thus  been  in  no  position  or 
mood  to  antagonize  society  by  unduly  raising  prices.  A 
budding  monopoly  which,  like  the  Standard  Oil  in  the 
past,  is  kept  busy  defending  its  corporate  life  and  crush- 
ing out  surviving  competitors,  has  ample  reasons  of  di- 
plomacy for  holding  prices  at  or  below  the  competitive 
level,  until  the  period  of  stress,  struggle  and  odium  is 
passed.  The  price  policy  of  such  a  monopoly  under  such 
conditions  can  furnish  no  criterion  by  which  to  judge 
the  probable  course  of  oar  present  family  of  monopolies 
when  they  shall  have  been  freed  through  legal  recogni- 
tion and  the  cessation  of  public  criticism  from  most  of 


88  TRUSTS  OR  COMPETITION t 

the  disabilities  which  have  held  down  their  predeces- 
sors. 

As  to  restraint  of  monopoly  through  potential  or 
possible  competition,  all  economists  agree  that  trust 
prices  will  have  to  be  placed  and  held  very  materially 
above  the  competitive  level  before  new  competitors 
with  adequate  capital,  skill  and  experience  will  be 
tempted  to  enter  the  field  against  the  enormous  enginery 
of  crushing  power  wielded  by  a  continental  monopoly- 
trust  In  any  event,  the  trusts  will  hold  prices  as  high 
as  their  self-interest  dictates.  Where  that  self-interest 
is  enlightened,  by  long  experience  or  otherwise,  prices 
will  be  considerably,  but  not  excessively,  above  the 
competitive  plane;  where  it  is  unenlightened  prices  will 
be  correspondingly  higher,  until  something  breaks — and 
meantime,  as  President  Hadley  remarks,  many  legiti- 
mate interests  will  be  sacrificed. 

However,  it  is  sufficient  to  accept  the  moderate  out- 
look first  abov6  referred  to.  If  the  people  are  to  pay  not 
lower,  but  somewhat  higher  prices,  under  the  trust  dis- 
pensation, as  even  the  most  favorable  view  concedes, 
what  return  are  they  receiving  for  their  enforced  sur- 
render of  industrial  freedom,  for  their  permanent  exclu- 
sion from  industrial  pursuits?  They  are  invited  to  go 
into  industrial  exile  for  their  own  economic  advantage, 
and  then  not  only  is  that  advantage  withheld,  but  they 
are  taxed  for  the  privilege  of  such  exile.  They  are  in- 
vited to  exchange  their  bread  for  economic  cake,  and  in 
fact  receive  an  economic  stone. 


APPENDIX 
TO  THE  ARGUMENT  AGAINST  THE  TRUST. 


CONCERNING  TRUSTS  IN  EUROPE. 

In  the  course  of  the  foregoing  argument  against  the  trust  the 
statement  is  made  that  the  system  does  not  prevail  in  Great  Britain 
nor  in  continental  Europe,  whence  the  inference  is  drawn  that  the 
movement  in  the  United  States  is  probably  artificial  and  not  a 
necessary  trade  evolution.  This  inference  is  manifestly  important 
if  true.  Inasmuch  as  President  Hadley  of  Yale  University,  in  his 
writings,  in  common  with  several  other  economists,  assumes  rather 
than  states  that  in  effect,  if  not  in  form,  our  monopoly  trust  system 
does  prevail  in  the  leading  commercial  countries  of  Europe,  the 
editor  addressed  him  a  note  of  inquiry  on  the  subject,  calling  his 
attention  to  the  very  explicit  letter,  printed  on  another  page,  from 
Mr.  Percy  Sanderson,  the  British  Consul-General  at  New  York. 

It  was  suggested  that  about  the  only  approach  to  the  typical 
American  trust  yet  developed  in  England  was  the  group  of  malodor 
ous  industrial  bubbles  inflated  by  the  notorkms  Hooley  and  his  titled 
retainers — enterprises  which  even  the  most  zealous  champion  of  the 
trust  system  would  scarcely  claim  as  the  offspring  of  economic 
evolution.  In  his  courteous  response,  dated  November  14,  1890, 
President  Hadley  says:  "All  the  German  authorities  unite  in  the 
quite  unequivocal  statement  that  the  industry  of  that  country  is  or- 
ganized in  close  combinations  or  syndicates,  analogous  to  trusts, 
and  give  a  sufficient  number  of  details  to  make  the  correctness  of 
their  information  unquestionable.  The  best  summary  is  found  in 
Liefmann  on  Industrial  Combinations.  It  has  not  been  translated  into 
English.  For  matter  bearing  on  the  subject  in  France  .refer  to  the 
files  of  the  Journal  des  Economists  and  the  Revue  d'Ecoiiouiie 
Politique."  Oi  Great  Britain  President  Hadley  says:  "English  in- 
formation is  more  scattered."  He  refers  to  the  well-known  Mogul 
Steamship  case  (in  deciding  which,  some  years  ago,  the  English 
courts  seemed  to  assert  the  broadest  liberty  of  combination  among 

89 


90  TRUSTS  OR  COMPETITIONt 

competitors)  and  concludes  thus:  "This  will  probably  refer  you  to 
other  cases.  The  English  keep  these  matters  so  quiet  that  you  do 
not  find  out  about  them  until  they  get  into  the  law  courts.  I  wish 
I  had  time  to  look  up  references  in  detail,  but  pressure  of  business 
makes  it  impossible.  If  you  are  not  already  familiar  with  Liefman 
you  will  find  it  well  to  get  at  it  at  once,  for  it  is  the  one  really  com- 
prehensive and  systematic  book  on  the  subject  which  has  been 
issued  in  any  language." 

Thus,  while  President  Hadley  seems  not  to  have  at  hand  any  evi- 
dence of  the  existence  of  monopoly-trusts  in  Great  Britain,  and  they 
certainly  could  not  exist  to  any  appreciable  extent  without  the  fact 
being  known  to  the  public,  he  makes  a  somewhat  positive  statement 
respecting  Germany,  mainly  on  the  authority  of  Dr.  Liefmann.  In- 
dependent investigation  led  the  writer  to  suspect  that  Dr.  Liefmann's 
references  had  been  misconstrued  and  to  believe  that  Germany  was 
no  exception  to  the  rule  that  even  in  effect  or  substance  the  American 
trust  system  does  not  prevail  in  European  countries.  An  effort  to 
settle  this  point  on  authority  which  no  one  could  question  resulted 
in  the  correspondence  which  is  given  herewith.  It  is  well  known 
that  the  German  consular  service  in  the  United  States  is  character- 
ized by  the  most  thorough-going  intelligence  respecting  the  commer- 
cial, industrial  and  financial  conditions  prevailing  both  in  Germany 
and  America.  This  is  especially  true  of  the  Imperial  German  Con- 
sulate at  Chicago,  which  includes  in  its  membership  a  most  com- 
petent trained  specialist  on  these  subjects  in  the  person  of  Mr.  G.  D. 
Waetzoldt  of  Berlin.  Such  an  expert,  necessarily  and  constantly 
studying  and  coming  in  contact  with  the  practical  and  comparative 
workings  of  commercial  and  industrial  methods  in  both  countries,  is 
obviously  the  best  possible  authority  on  such  a  question: 

Chicago,   Nov.  27,   1899. 

Mr.  G.  D.  Waetzoldt,  Technical  and  Commercial  Attache,  Imperial 
German  Consulate,  Chicago. 

Dear  Sir:—  *  *  *  You  are  aware  that  a  very  large  number  of 
leading  industries  in  the  United  States  have  been  practically  unified 
or  consolidated,  each  under  a  single  ownership  technically  called  a 
trust.  This  has  been  accomplished  in  each  instance  by  the  organiza- 
tion of  a  corporation  and  the  purchase  by  it  of  the  plants  and  busi- 
nesses (not  the  stock  capital)  of  all  or  nearly  all  the  manufacturing 
concerns  constituting  a  given  industry  within  the  republic,  thus 
suppressing  all  effective  competition  and  creating  a  virtual  monopoly 
in  such  industry. 

Inquiry  has  brought  to  me  the  information  that  no  trust  system 
or  movement  substantially  like  ours  exists  in  the  German,  Empire, 


DOES  THE  TRUST  PREVAIL  IN  EUROPE?  91 

but  that  in  each  of  your  leading  industries  there  is  an  understanding 
or  syndicate  arrangement  whereby  all  manufacturers  agree  upon  a 
minimum  selling  price  throughout  the  Empire,  which  price  is  usually 
nxed  at  a  very  moderate  margin  above  the  cost  of  production,  the 
general  object  being  to  prevent  what  is  known  here  as  cut-throat  com- 
petition, and  to  maintain  a  level  of  prices  fairly  remunerative  to  pro- 
ducers and  not  oppressive  to  consumers;  that  above  this  low  level 
of  prices  entire  liberty  of  fixing  prices  prevails;  that  in  other  respects 
the  usual  forms  of  reasonable  competition  are  practiced  among  the 
members  of  each  syndicate,  as  in  the  case  of  competitive  bids  for 
contracts,  purchasing  of  raw  material,  etc.;  that  there  is  no  consider- 
able movement  in  Germany  toward  the  merging  of  an  entire  in- 
dustry throughout  the  Empire  in  one  great  corporation  with  a  view  to 
eliminating  competition  and  creating  and  maintaining  a  virtual  monop- 
oly; that  each  manufacturing  concern  which  is  a  member  of  a  syn- 
dicate maintains /its  entire  industrial  independence. 

I  wish  you  would  inform  me  whether  the  foregoing  information 
is  substantially  correct,  and  give  me  any  further  facts  at  your  dis- 
posal as  to  the  practical  working  of  the  German  syndicate  system. 
For  example: 

1.  What  is  the  attitude  of  each  syndicate  toward  new  competi- 
tors, or  those  who  propose  to  become  competitors  in  the  same  field? 

2.  Are  these   syndicate   arrangements   or   organizations   consid- 
ered entirely  lawful? 

3.  Is  there  any  popular  protest  against  them  as  being  monopo- 
listic, and  do  consumers  complain  that  prices  are  exorbitantly  high 
in  any  lines   because   of   these   agreements   or   combinations   among 
manufacturers? 

4.  Are   these   syndicate   agreements    usually   in    written    form? 
What  penalties  attach  to  their  violation,  and  are  they  enforcible  at 
law? 

5.  Do  these  syndicate  agreements   in   any  instances   include   a 
limitation  of  product  for  the  purpose  of  preventing  supply  from  out- 
running demand,  and  thus  dropping  market  prices  below  the  level  of 
cost?  Yours  truly, 

A.    B.    NETTLETON. 

REPLY. 

Chicago,  Nov.  28,  1899. 
Gen.  A.  B.  Nettleton,  Chicago,  111. 

Dear  Sir: — Replying  to  your  favor  of  November  27th,  I  take  pleas- 
ure in  giving  you  the  following  information  concerning  "trusts"  in 
Germany: 

You  are  right  in  assuming  that  corporations  or  "trusts"  of  the 
character  snch  organizations  have  in  the  United  States  do  not  exist 
in  Germany.  There  may  be  in  Germany  some  corporations  or  syn- 
dicates that  come  pretty  near  to  your  system  of  purchasing  and  clos- 
ing, indefinitely  or  temporarily,  competing  plants;  but  such  cor- 
porations are  not  as  numerous,  powerful  or  far-reaching  in  scope 
of  monopolization  as,  for  example,  are  the  American  Steel  &  Wire 
Company  or  the  International  Iraper  Company. 


92  TRUSTS  OR  COMPETITION? 

The  most  characteristic  feature  of  the  "Trust"  in  the  United 
States  consists  in  the  purchase  of  plants  and  businesses  by  the  or- 
ganizers of  the  Trust,  the  retirement  from  business  of  the  former 
owners  of  these  plants  and  businesses,  and  the  loss  of  their  individual- 
ity by  the  concerns  that  are  absorbed  by  the  new  corporation.  There 
are,  of  course,  cases  in  Germany  where  smaller  concerns  are  bought 
up  by  larger  ones,  as,  for  instance,  Friedr.  Krupp  buying  mines  or 
shipyards;  but  as  a  rule  such  purchases  are  not  made  for  the  purpose 
of  forming  a  trust  or  monopolizing  a  certain  industry.  As  you  point 
out  in  your  letter,  the  general  object  of  numerous  associations  or 
syndicates  of  manufacturers  in  Germany  is  to  prevent  the  ruin  of 
their  respective  industries  by  "cut-throat"  competition  through  an 
agreement  concerning  the  minimum  selling  price  of  manufactured 
goods.  The  form  of  these  agreements  differs  largely  and  ranges 
from  a  "gentlemen's  agreement"  to  the  most  rigid  stipulations. 
Aside  from  agreements  as  to  minimum  selling  prices  there  are  agree- 
ments made  occasionally  in  regard  to  the  establishment  of  central 
offices  for  the  sale  of  the  goods  manufactured  in  the  plants  of  the 
members  of  the  syndicate  or  for  the  distribution  of  orders  among 
them  or  for  both  purposes.  Every  individual  member  of  a  syn- 
dicate or  association  remains  in  absolute  control  of  his  plant  or  plants, 
and  is  not  in  any  way  interfered  with  or  hindered  in  running  his 
plant  or  plants  as  he  deems  best  to  gain  advantages  by  producing  at 
a  cheap  rate. 

Answering  your  special  questions,  I  would  state  as  follows: 

Question  1.  The  attitude  of  syndicates  toward  new  competitors 
in  the  same  field  depends  on  the  character  of  the  syndicate  or  the 
new  competitor.  If  a  friendly  understanding  is  out  of  the  question, 
the  syndicate  will  be  compelled  to  protect  its  interests  by  all  lawful 
means. 

Question  2.  Syndicates  or  organizations  of  the  character  men- 
tioned above  are  lawful.  In  conducting  their  business  or  fixing  their 
rules,  they  have,  of  course,  to  comply  with  the  laws  concerning 
the  formation  of  commercial  corporations  or  stock  companies. 

Question  3.  There  is  no  popular  protest  against  the  syndicates 
as  being  monopolistic.  Complaints  are  made  occasionally  by  some 
manufacturers,  when  prices  of  materials  in  crude  or  semi-crude  con- 
dition are  raised  by  syndicates. 

Question  4.  Syndicates'  agreements  are  usually  in  writing;  the 
penalty  for  violation  thereof  consists  in  fines  enforcible  at  law,  pro- 
vided that  the  syndicate  itself  is  lawful. 

Question  5.  The  sole  purpose  of  some  of  the  syndicates  is  to  limit 
production  and  to  prevent  the  market  price  from  dropping  below  the 
cost  of  production  through  overproduction  and  consequent  over- 
stocking. Yours  very  truly. 

G.  D.  WAETZOLDT. 

COMMENT. 

I.  Inquiry  elicits  the  information  that  the  industrial  syndicates 
in  France  are  not  more  like  American  trusts  than  are  those  of 
Germany. 


THE  FUTURE  OF  COMPETITION.  93 

II.  It  becomes  evident  that  those  American  writers  on  economics 
who  have  assumed  without  original  investigation  that  our  monopoly 
trust  system  substantially  prevails  in  Europe  arc  simply  mistaken, 
and  their  economic  deductions   based  on   that   assumption  are  not 
only  valueless,  but  are  distinctly  misleading  at  a  most  critical  time 
in  our  own  industrial  history. 

III.  It  is  apparent  that  although  the  German  syndicate  system 
possesses  objectionable  elements,  is  open  to  some  abuses,  and  would 
at  present  be  illegal  in  the  United  States,  it  is  nevertheless   free 
from  nine-tenths    of   the   injurious   and    dangerous    features    which 
characterize  the  American  monopoly  trust  system,  and  which  have 
been  outlined  herein. 

IV.  It  is  not  impossible  that  the  next  and  permanent  form  to  be 
taken  by  American  industries  will  in  many  respects  closely  resemble 
the  present  German  system,  with  such  modifications  as  will  adapt 
it  to  our  circumstances  and  to  the  genius  of  our  people.     Most  think- 
ing persons  agree  that  it  is  desirable,  if  not  indispensable,  to  find  a 
reasonable  middle  ground  between  unbridled  and  destructive  com- 
petition on   the   one    hand    and    arbitrary    and    intolerable    private 
monopoly  on  the  other.     Such  a  system  would  permit  the  free  play 
of  economic  forces  within  the  lines  of  public  welfare;  would  preserve 
all  that  is  valuable  in  the  competitive  system,  while  avoiding  most 
of  the  evils  that  have  heretofore  been  regarded  as  inseparable  from 
it;  would  encourage  large-scale  production  up  to  the  maximum  of 
efficiency  and  economy,  but  would  prohibit  passing  beyond  that  natural 
limit  to  the  stage  of  monopoly  for  the  sake  of  monopoly;  would  in- 
troduce common  sense  into  the  methods  of  production  and  distribu- 
tion, and  banish  the  lunacy  involved  in  the  old  theory  that  com- 
petition   is    .necessarily    commercial    war;    would    allow    producers 
to  co-operate  or  agree  in  order  to  compete  more  humanely,   more 
sensibly  and   more  profitably,   but  would   prevent  combination   and 
agreement  to  monopolize  and  oppress;   would  preserve  independent 
and  diversified  proprietorship  and  maintain  the  open  door.     It  goes 
without  saying  that  such  a  re-suit  would  be  a  compromise;  that  it 
would  require  on  the  one  ha,nd  the  disintegration  and  retirement  of 
the  modern  trust  system,  and  on  the  other  a  modification  of  the  rule 
of  public  policy  and  of  statute  l;iw,  which  now  in  many  places   pro- 
hibit even  reasonable  agreements  to  regulate  competition,   preserve 
the  solvency  of  industries  and  the  steadiness  of  business  and  em- 
ployment, and  thus  promote  the  public  welfare. 

V.    In  scores  of  instances  throughout  the  United  States  local  and 


94  TRUSTS  OR  COMPETITION? 

general  industries  have  been  for  years,  and  now  are,  protecting  them- 
selves from  mutually  destructive  competition  by  arrangement  or 
harmony  of  policy  as  to  prices  and  other  details  of  business  without 
entering  into  affirmative  agreements  or  combinations  that  are  con- 
trary to  public  policy,  or  in  violation  of  anti-trust  statutes.  Ex- 
amples are  the  two  leading  telegraph  companies,  the  fire  great  ex- 
press companies,  practically  all  of  the  trunk  railway  lines  and  many 
manufacturing  industries  not  merged  in  trusts.  This  course,  which 
may  be  denominated  concert  without  compact,  is  distinctly  favored 
by  the  United  States  Supreme  Court  hi  its  decision  of  the  Joint  Traffic 
Association  case  (Supreme  Court  Reporter,  Vol.  19,  No.  3,  page  35). 


Students  of  the  trust  problem  will  profit  by  reading  the  re- 
markable book  entitled  "Anglo-Saxon  Superiority:  To  What  Is  It 
Due?"  by  Eduiond  Demolins,  director  of  the  French  review,  "La 
Science  Social"  (1898).  Written  by  a  leading  French  specialist  in 
sociology  for  a  French  audience,  it  is  a  marvelous  grouping  of  facts 
and  arguments  in  proof  of  French  degeneracy  along  nearly  all 
lines,  and  what  is  still  more  remarkable  most  French  critics  com- 
mend the  book  and  its  conclusions.  M.  Demolins  not  only  admits, 
but  proclaims,  that  the  French  people  are  afflicted  with  a  racial  in- 
feriority which  manifests  itself  in  commercial,  industrial,  financial  and 
domestic  affairs;  in  short,  that  the  radical  defect  inheres  in  French 
character  and  hence  inevitably  shows  itself  in  about  every  mani- 
festation of  French  life.  This  includes  a  limitation  of  progeny  for 
economic  reasons  to*  a  point  which  at  length  threatens  the  relegation 
of  the  French  nation  to  the  third  or  fourth  rank.  The  chief 
fundamental  difference  between  the  Latin  and  the  Anglo-Saxon 
character,  the  French  author  finds  to  be  this:  The  Latin  inherits 
and  absorbs  from  his  environment  the  communistic  or  gregarious 
taint  and  tendency,  while  the  Anglo-Saxon  both  inherits  and  cul- 
tivates the  tendency  to  individualism  or  particularism.  The  out- 
working of  these  diverse  tendencies  in  racial  character,  method  and 
aptitude  goes  far  to  account  for  the  inferiority  and  decadence 
of  the  Latin  and  the  superiority  and  sustained  progress  of  the 
Anglo-Saxon.  The  Frenchman  is  born  and  trained  to  lean  upon 
the  state,  upon  society,  upon  organization  and  institutionalism,  to 
live  and  move  in  herds,  and  in  an  atmosphere  of  dependence  and  op- 
portunism. French  boys  are  mainly  educated  in  how  not  to  take 
the  initiative,  how  to  avoid  an  independent  or  individualistic  career, 
how  to  "get  a  job"  and  hold  it,  in  the  army,  the  navy,  the  church, 
in  the  civil  list,  or  in  subordinate  service  for  a  great  organized  in- 
dustry. On  the  other  hand,  Anglo-Saxon  youth,  at  least  hitherto, 
have  mostly  been  taught  from  the  first  to  stand  alone,  and  then  to 
carve  their  own  way  in  life,  with  a  strong  preference  for  being  first 
in  their  own  establishments,  though  small,  rather  than  holders  of 
chairs  and  recipients  of  salaries  in  governmental  or  industrial  bu- 
reaus. The  difference  in  result  is  the  difference  between  uieu  and 


EVILS  OF  OVERCAPITALIZATION.  95 

bureaucrats,  between  advance  and  stagnation.  The  candid  student 
of  current  events  may  conclude  that  a  central  wrong  of  the 
American  trust  system  is  that  it  introduces  a  Latinizing  tendency 
into  Anglo-Saxon  civilization;  that  it  is  thus  a  force  which  makes 
distinctly  for  degeneracy  in  our  national  character.  So  far  as  its 
influence  extends,  and  it  is  far-reaching,  it  threatens  to  produce  in 
America  conditions  resembling  those  in  France  and  other  L-atin 
communities,  as  frankly  characterized  by  this  eminent  and  fearless 
Frenchman.  Robust  individuality,  self-reliance,  power  and  prefer- 
ence of  initiative,  distinctive  personality,  ingrained  choice  of  in- 
dependence, instinctive  revolt  aganst  bossism,  these,  combined  with 
that  saying  common  sense,  which  gives  power  and  aptitude  for  self- 
respecting  association  and  co-operation  for  producing  large  results, 
are  the  traits  which  all  recognize  as  forming  the  base  and  crown 
of  Anglo-Saxon  character  and  civilization.  Yet  these  are  precisely 
the  traits  which  the  new  system  of  monopoly-trusts  must  under- 
mine and  largely  eliminate  before  it  can  become  the  accepted  indus- 
trial and  commercial  policy  of  our  people. 


Professor  Jenks  defines  a  trust,  or  capitalistic  monopoly,  as  an 
organization  which  "so  controls  business,  whatever  it  may  be,  as 
practically  to  regulate  competition  and  to  fix  the  prices  of  its  prod- 
ucts on  the  whole  with  little  reference  to  competitors,  or  to  the 
cost  of  production,  but  mainly  with  reference  to  securing  the  great- 
est net  results." 

OVERCAPITALIZATION. 

In  spite  of  all  glosses  the  systematic  and  audacious  over- 
capitalization of  trusts  is  a  wrong  of  the  gravest  character  and 
greatest  magnitude.  (1)  Without  the  inducement  of  this  fabulous 
reward  to  promoters,  their  bankers  and  some  manufacturers,  the 
trust  system  as  it  now  is  would  have  been  non-existent.  (2)  It 
deludes  and  swindles  investors,  and  while  there  is  some  justice 
in  the  contention  that  intelligent  persons  were  sufficiently  warned 
by  the  abnormal  and  evidently  speculative  nature  of  the  invest- 
ment, yet  the  great  mass,  particularly  of  small  investors,  cannot 
discriminate.  (3)  But  the  central  and  enduring  evil  of  overcapi- 
talization lies  here:  This  fictitious  capital  and  the  possibility  of 
making  it  worth  par  in  the  market  is  the  colossal  bribe  urging 
on  the  trust  owners  and  managers  to  extort  from  all  available 
sources  profits  large  enough  to  accomplish  this  result.  The 
element  of  water  in  our  existing  trusts  does  not  fall  below 
$3.000,000,000.  If  dividends  are  to  be  paid  on  this  bulk 
of  spurious  capital,  or  on  any  great  part  of  it,  this  new  and 
added  burden  upon  our  industries  must  fall  somewhere.  There 
are  just  three  sources  from  which  this  dividend  fund  can  be 
drawn:  First,  from  legitimate  economies  resulting  from  large- 
scale  production  and  distribution,  and  these  are  not  equal  to  one- 
tenth  of  the  requirement;  second,  from  reduced  fewards 


96  TRUSTS  OR  COMPETITION f 

to  labor  and  to  producers  of  raw  material;  and  third,  from 
higher  prices  to  customers.  To  illustrate  by  approximate  fig- 
ures: Before  the  trust  came  the  owners  of  all  American  tin 
plate  mills  were  content  to  make  a  profit  of  say  ten  per  cent,  per 
annum  on  an  actual  investment  of  $10,000,000.  Here- 
after they  will  only  be  content  to  make  like  dividends  on  550,- 
000,000,  with  but  slightly  greater  investment.  Extend  these 
figures  in  due  proportion  to  ail  the  industries  that  in  the  past 
two  years  have  been  consolidated  with  stock  and  bond  capital 
multiplied  from  two  to  nine  times  beyond  actual  values  of  as- 
sets and  good  will,  and  the  size  of  the  problem  is.  realized.  If 
the  monopoly-trust  system  is  really  here  to  stay  this  tremendous 
mortgage  on  the  future  promises  never  to  be  discharged.  If  it 
be  again  suggested  that  the  fear  of  possible  competition  will 
prevent  the  earning  of  dividends  on  much  fictitious  capital,  the 
facts  of  recent  history  do  not  confirm  this  hopeful  view.  Presi- 
dent Hadley,  speaking  of  the  temptation  under  which  the  mana- 
gers of  modern  trusts  constantly  labor  to  raise  prices  in  the 
absence  of  competition,  says:  "Our  past  experience  with  in- 
dustrial consolidations  proves  that  very  few  men  are  capable  of 
resisting  this  temptation  or  of  exercising  the  wider  power  over 
business  which  the  modern  system  places  in  their  hands,"*  and  he 
implies  that  the  trust  may  be  expected  to  hold  prices  as  high  as 
it  can  and  not  destroy  its  market  and  thus  destroy  itself.  But 
a  more  conclusive  answer  is  the  fact  that  three  of  our  trusts 
are  to-day  earning  dividends  on  the  equivalent  of  not  less  than 
$300,000,000  of  fictitious  capital.  The  natural  policy  of 
the  managers  of  the  newer  and  overcapitalized  trusts  will  be  at 
first  to  keep  prices  down  (1)  until  competition  is  permanently 
disposed  of,  (2)  until  public  criticism  is  allayed,  (3)  until  they 
have  gathered  in  the  outstanding  common  stock  at  nominal 
prices,  after  which  they  may  be  expected  to  fix  prices  of  com 
modifies  as  high  as  the  market  will  stand,  in  the  absence  of 
competition  and  proceed  to  pay  dividends  on  both  preferred  and 
common  shares. 

TRUSTS  VS.  "LARGE  CORPORATIONS." 

Prof.  Gunton,  in  Gunton's  Magazine,  for  September,  1899,  says: 
"There  is  not  a  trust  left  in  the  United  States.  There  never  were  more 
than  about  half  a  dozen  and  they  have  all  been  dissolved  and  converted 
Into  large  corporations.  In  reality,  then,  the  war  on  trusts  is  a  war  ou 
corporations,  pure  and  simple.  *  *  *  To  call  it  a  crusade  against  trusts 
is  to  practice  a  fraud  upon  the  people."  Senator  Mark  Hanna  in  a  press 
interview  (October  22,  1899),  quotes  this  language  of  Prof.  Gunton  ap- 
provingly as  virtually  disposing  of  the  trust  question.  It  seems  incredible 

*"The    Formation    and    Control    of    Trusts,"    Scribner's    Magazine, 
November,  1899. 


THE  TRUST  VS.  THE  LARGE  CORPORATION.     97 

that  any  one  should  attempt  to  silence  a  great  debate  with  a  play  upon 
words,  as  if  one  should  attack  the  ten  commandments  with  a  pun.  Ex- 
cept these  two  gentlemen  the  whole  nation,  including  legislatures,  courts, 
law  writers,  poJitical  economists,  the  entire  press  and  seventy  million 
people  have  agreed  to  call  by  the  name  of  trust,  that  new  thing,  the  large 
corporation  organized  for  the  purpose,  and  which  deliberately  monopolizes 
au  industry.  The  name,  trust,  was,  of  course,  transferred  and  adapted,  by 
a  well-known  process  in  language-building,  from  the  real  trust  organiza- 
tion originally  employed.  Let  us  see  if  an  object  lesson  will  make  clear 
the  difference  between  a  Jarge  corporation  and  a  trust:  (1)  The  Baldwin 
Locomotive  Works,  of  Philadelphia,  is  a  corporation,  whose  large  capital 
and  whose  vast  business  reaching  every  continent,  have  developed  natur- 
ally. It  has  carried  large-scale  production  to  the  maximum  of  economy 
and  efficiency  by  repeated  enlargements  of  its  one  plant.  It  possesses  and 
seeks  no  monopoly.  It  meets  and  does  not  complain  of  actual  competi- 
tion, domestic  and  foreign.  Its  owners  are  content  with,  and  consumers  are 
taxed  for,  a  fair  return  on  a  conservative  valuation  of  its  business,  which 
for  the  present  purpose  may  be  estimated  at  $10,000,000.  This  is  evidently 
not  a  trust.  (2)  The  American  Tin  Plate  Company  is  also  a  corporation, 
but  here  the  resemblance  ceases.  It  was  recently  organized  for  the  sole 
purpose  of  monopolizing  the  tin  plate  industry  in  the  United  States, 
and  this  it  has  done,  by  absorbing  all  of  the  thirty-five  establishments, 
thus  artificially  and  arbitrarily  suppressing  all  competition  in  a  neces- 
sary staple.  The  plants  and  businesses  which  it  bought  had  an  approxi- 
mate value  of  .$10,000,000.  On  this  basis  the  new  company  issued  $50,OJO,000 
of  stock  of  which  President  Reed  has  testified  that,  ten  millions  were 
given  to.Judge  Moore,  the  promoter  for  his  brief  service  in  bringing  about 
the  consolidation.  For  various  reasons  the  price  of  tin  plate  has  been 
nearly  doubled  in  eighteen  months.  The  vice-president  of  the  company 
testifies  that  it  Is  now  earning  dividends  on  the  entire  stock  capital,  which 
means  that  consumers  are  .taxed  to  pay  a  return  on  at  least  four  times  the 
Investment  and  fair  value  of  the  business.  This  is  evidently  a  typical 
trust, 

A  TRUST  DEFINED. 

The  report  of  the  Lexow  Trust  Investigating  Committee  of  the  New 
York  State  Senate,  filed  March  9,  1897,  clearly  draws  this  line  of  distinction 
between  the  legitimate  and  natural  centralizing  tendency  within  competi- 
tive lines  on  the  one  hand  and  the  monopoly-trust  en  the  other.  As  to  the 
first  the  report  says: 

"Combinations  of  capita)  starting  with  small  partnerships  and  ter- 
minating with  large  aggregations,  based  on  corporate  organizations,  rep- 
resenting the  contributions  of  innumerable  stockholders  to  a  common 
fund,  thus  investing  for  the  purpose  of  reaping  the  reward  arising  from 
economies  growing  out  of  the  concentration  of  resources  and  the  employ- 
ment of  the  best  skill,  the  highest  intellect,  the  most  improved  machinery 
and  the  most  qualified  labor,  are  not  in  themselves,  in  our  judgment, 
reprehensible  or  against  any  known  principle  of  public  policy.  That  the 
latter  have  been  increasing  in  size,  in  wealth  and  relatively  in  influence 
within  recent  years,  is  a  sign  of  the  times  which  naturally  gives  rise  to 
discussion,  to  conjecture,  and  in  some  cases  to  apprehension  as  to  the 
future.  But  it  is  a  situation  which  seems  to  be  the  natural  evolution 
growing  out  of  the  fierce  contest  for  supremacy  in  the  fields  of  commerce 
and  finding  a  reflection  in  almost  every  department  of  human  activity. 
That  it  Is  a  natural  evolution  seems  clear  from  the  fact  that  it  is  the  uni- 
versal concomitant  of  progress.  Capital  and  labor  operate  and  should  con- 
tinue to  exist  under  the  laws  of  mutual  dependence.  Both  labor  and 
capital  should  be  permitted  the  utmost  freedom  of  liberty  and  action, 
limited  only  by  regard  by  each  for  the  other  and  for  the  safety  and 
welfare  of  the  state." 

Then  It  thus  defines  the  trust  and  Its  working; 

7 


98  TRUSTS  OR  COMPETITION? 

"Interpreting  combinations  of  capital  to  be  the  gathering  together 
under  one  management  of  the  collective  contributions  of  many  for 
strictly  business  purposes,  involving  economy  in  the  several  stages  which 
result  in  the  final  distribution  of  the  product  to  the  consumer,  we  define 
the  trust  to  be  an  aggregation  brought  about  for  the  purpose  of  operating 
against  the  natural  law  of  supply  and  demand,  destroying  competition 
by  combination  and  unfair  methods  in  order  to  secure  control  of  both 
product  and  market,  or  permitting  competition  to  exist  only  colorably  and 
to  the  extent  of  refuting  the  charge  of  absolute  monopoly.  The  one 
moves  with  the  natural  law;  the  other  is  designed  to  and  does  operate 
against  the  natural  law." 

A  COGENT  PRESENTATION. 

The  New  York  Journal  of  Commerce,  the  oldest  and  most  authorita- 
tive exponent  of  conservative  New  York,  in  its  issue  for  March  23.  1899, 
editorially  said,  speaking  of  the  trust  movement: 

"The  change  is  the  most  stupendous  revolution  ever  accomplished 
in  the  history  of  the  world's  industrial  growth.  Its  suddenness  is  as 
remarkable  as  its  magnitude.  It  has  come  with  none  of  the  careful  de- 
liberation that  usually  attends  the  investment  of  great  aggregations  of 
capital.  It  has  been  guided  by  no  precedent  experience.  It  is  110  gradual 
result  of  a  natural  evolution.  *  *  *  It  is  a  reversal  of  all  that  econo- 
mists have  accepted  as  fundamental  axioms  of  trade.  It  is  an  undeliber- 
ated  revolt  against  the  most  essential  force  in  the  regulation  of  produc- 
tion, distribution  and  values — the  natural  law  of  competition.  It  amounts 
to  a  complete  disruption  of  the  relations  between  the  industrial  forces 
and  classes  of  society.  It  is  an  extinguishment  of  the  voluntary  exchanges 
between  the  producing  and  merchanting  interests  and  the  creation  of 
one  exclusive  producing  organization  for  each  industry  to  which  all  other 
material  interests  must  yield  subjection.  Industry  at  large  is  organized 
into  a  system  of  feudalized  corporations,  each  one  of  which  enjoys  abso- 
lute power  within  its  special  branch  of  production,  while  taken  in  the 
mass  the  system  constitutes  itself  the  supremest  trade  power  in  the  na- 
tion. These  innoyations  upon  the  fixed  methods  of  industry,  though  fun- 
damentally affecting  tin?  citizen's  free  access  to  the  opportunities  of  in- 
dustrialism, take  little  account  of  legislation,  equally  ignoring  the  law 
as  it  stands  and  as  it  may  possibly  be  changed  to  meet  the  case.  This 
headlong  precipitancy  has  pursued  its  purpose  almost  without  forethought, 
certainly  with  slight  consideration  for  trade  moralities  or  for  the  weight- 
iest of  human  liberties  and  with  little  regard  for  the  perils  of  public  order 
which  the  outworkings  of  the  system  are  too  liable  to  evoke. 

"In  advance  of  the  event,  it  would  not  have  been  deemed  possible  that 
the  most  Important  class  among  our  trained  and  responsible  capitalists 
could  at  one  such  bound  take  a  daring  leap  into  the  dark.  The  change 
is  at  best  a  stupendous  experiment.  *  *  *  The  change,  however,  is  now 
a  fixed  fact.  It  places  nearly  our  entire  industrial  system  upon  the 
monopolistic  basis.  That  is  a  venture  unparalleled  in  the  history  of  ma- 
terial civilization;  and  not  merely  the  manufacturing  interest,  but  the 
still  vaster  interests  thereon  dependent,  can  but  await  the  outcome  with 
an  expectancy  that  must  grow  more  intense  as  the  trial  progresses." 


It  was  the  central  tenet  of  Karl  Marx,  the  socialist  leader,  that  social- 
ism would  come  as  a  strictly  logical  and  inevitable  evolution  in  nature, 
and  that  as  infallibly  as  capitalism  followed  feudalism,  so  communism 
would  follow  capitalism.  He  predicted  that  under  the  capitalistic  system 
things  would  constantly  grow  worse,  and  that  centralization  of  capital 
would  progress  until  all  was  ready  for  a  peaceable  transition  from  a  cap- 
italistic plutocracy  to  the  ideal  socialistic  democracy.  Supporters  of  the 
Marxian  doctrine  point  to  the  trust  movement  as  confirmation  of  Marx's 
prediction. 


CHAPTER  III. 
THE  COLLEGE  AND  THE  TRUST. 

Opinions  of  Economists— Matured  Views  from  Leading  Seats  of  Learn- 
ing—Tiio  East  and  West  Represented— Light  Without  Heat— The 
System  of  Unified  Industries  Analyzed — Papers  from  the  Professors 
of  Political  Economy  in  Colleges  ajid  Universities. 


CORNELL  UNIVERSITY. 

PBOFKSSOB  JEKEMIAH  \V.  JENKS,  AT  THE  CHICAGO  TRUST  CONFERENCE. 

The  first  formal  address  before  the  Conference  was  delivered 
by  Prof.  J.  W.  Jeuks,  of  the  Chair  of  Political  Economy  ill  Cor- 
nell University.  Besides  having  for  some  time  made  a  special 
study  of  the  question,  Prof.  Jenks  was  at  the  time  of  the  Con- 
ference the  economic  expert,  serving  as  a  member  of  the  United 
States  Industrial  Commission,  created  by  Congress  for  the  pur- 
pose of  making  an  exhaustive  official  investigation  of  the  trust 
problem  in  common  with  other  industrial  questions  of  the  time. 
The  address  was  entitled  "Trust  Problems"  and  is  given  here 
in  full. 

It  is  a  calm  and  scholarly  statement  of  the  questions  raised 
by  the  trust  movement,  rather  than  a  discussion  of  those  ques- 
tions. The  speaker  said: 

It  has  been  well  said  that  the  first  essential  for  the  attainment 
of  scientific  knowledge  is  to  get  a  definite  outline  of  one's  ignorance. 
It  is  certainly  true  that  a  long  step  has  been  taken  toward  the  solution 
of  a  problem  when  the  problem  itself  has  been  clearly  stated.  It 
may  be  of  service,  therefore,  if  the  various  questions  which  the  present 
combinations  of  capital  have  raised,  and  toward  the  solution  of  which 
this  conference  may  well  contribute  much,  be  brought  together.  I 
cannot  expect  to  state  clearly  all  of  the  questions  raised  by  the  growth 
of  these  industrial  combinations,  but  I  mention  some  of  the  most 
important  ones  as  they  have  been  called  to  my  attention. 

1.  Competition  versus  Combination. — It  has  oi'teu  been  assumed 
that  industrial  combinations  and  monopolies  have  abolished  compe- 

99 


100  TRUSTS  OR  COMPETITIONf 

tition.  On  the  other  hand,  managers  of  the  most  important  industrial 
combinations  invariably  assert  that  they  have  much  competition, 
and  that  the  principle  of  competition  is  still  active  as  long  as  anyone 
is  legally  free  to  set  up  a  rival  establishment.  Many  students  of  the 
question  have  asserted  that  among  great  industrial  organizations 
competition  is  fiercer  than  among  smaller  establishments,  and  that 
combination  does  not  abolish  competition,  but  simply  raises  it  to  a 
higher  plane.  So  long  as  there  is  not  a  state  monopoly  like  that  of 
the  postoffice,  or  a  legal  monopoly  like  that  established  by  a  patent, 
there,  of  course,  is  at  least  potential  competition.  A  rival  may  at 
least  enter  the  lists.  But  a  question  on  which  many  people  are  not 
yet  clear  is  how  far  large  combinations  of  capital  possess  a  monopoly 
in  fact,  and  how  far  these  large  industrial  combinations  are  able  to 
fix  prices  on  the  monopolistic  principle  of  securing  the  highest  net 
returns  with  little  reference  to  what  others  charge,  even  though  there 
may  exist  in  the  business  some  few  other,  but,  relatively  speaking,  un- 
important, establishments.  How  far  can  an  establishment  which 
sells  only  a  high  percentage,  say  75  to  90  per  cent  of  the  total  product, 
secure  monopolistic  gains?  Is  competition  to  be  considered  free  when 
one  establishment  controls  from  75  to  90  per  cent  of  the  entire  prod- 
uct in  the  market? 

2.  Combinations  of  Capital  and  Combinations  of  Labor. — Some 
of  the  most  active  opponents  to  organized  capital  have  been  found  in 
the  ranks  of  organized  labor.    Some  of  the  managers  of  industrial 
combinations  assert  that  they  have  been  forced  to  combine  on  account 
of  the  power  of  organized  labor.    They  assert  that  the  principle  of 
combination  is  the  same  in  both  cases,  and  that  labor  organizations 
are  no  less  tyrannous  than  are  organizations  of  capital.    Before  legis- 
lation regarding  combinations  is  undertaken  the  question  should  be 
clearly  answered  whether  the  two  classes  or  organizations  are  the 
same  in  principle,  and  whether  a  law  which  restrains  one  will  be  held 
by  the  courts  to  restrain  the  other  also. 

3.  Combinations  Caused  by  Special  Privileges. — It  has  been  as- 
serted lately  that  the  "mother  of  all  trusts  is  the  customs  tariff  law." 
Many  industries,  however,  in  which  great  combinations  exist  have  no 
protection  of  their  products  by  the  tariff.    Managers  of  combinations 
which  have  been  formed  in  protected  industries  assert  that  it  has  been 
the  fierceness  of  home  competition  that  has  driven  them  into  combina- 
tion, and  that  if  the  tariff  has  been  in  any  sense  the  cause  of  the 
combination  it  has  been  such  only  by  developing  the  home  industry  to 
so  great  an  extent  that  fierce  competition  was  unavoidable.    How 
large  a  proportion  of  the  trusts  does  the   protective  tariff  favor? 
Would  a  lowering  of  the  tariff  on  protected  industries  in  which  in- 
dustrial combinations  have  been  formed  destroy  the  combination,  or 
would  it  merely  lead  to  international  combination  such  as  already 
exists  at  least  in  one  or  two  instances?    Or  would  it,  without  breaking 
the  combination,  have  the  effect  of  lowering  prices  through  foreign 
competition? 

Other  combinations  of  great  power  have  been  formed  in  in- 
dustries protected  by  patents,  and  have  secured  monopolistic  prices 
through  the  aid  of  the  patent  laws.  Would  it  be  in  the  interests  of 
the  public  and  would  it  be  practicable  so  to  amend  our  patent  laws 


PROFESSOR  JENKS  OF  CORNELL.         101 

as  to  remove  from  them  the  element  of  monopoly  while  still  securing 
to  the  inventor  by  royalty  or  otherwise,  according  to  different  sug- 
gestions, a  suitable  reward  for  his  inventive  skill? 

It  has  been  frequently  asserted  that  the  success  of  many  of  the 
leading  combinations  of  capital  has  been  due  to  special  favors  granted 
them  by  discriminating  rates  on  railroads.  It  is  also  asserted  by  some 
that  the  most  successful  combinations  of  the  present  day  find  it 
rather  for  their  interest  to  observe  strictly  the  interstate  commerce 
law  and  to  insist  upon  it  that  the  railroads  shall  grant  no  discrimina- 
tions to  anyone,  whereas  it  is  for  the  interests  of  those  small  combi- 
nations that  are  still  struggling  for  a  firm  foothold  to  secure  such 
discrimination.  It  is  believed  by  many  people  that  railroad  discrimi- 
nations are  still  very  frequent.  Most  important  questions  to  be  solved 
are,  first,  one  of  fact.  To  what  extent  and  to  whom  do  the  railroads 
grant  discriminating  rates?  And  second,  What  further  remedy  can 
be  found  for  such  discrimination  beyond  that  which  now  exists  under 
the  interstate  commerce  laws  of  the  several  states 

4.  Other  Causes  for  the  Formation  of  Combinations  of  Capital. 
— -Managers  of  great  capitalistic  organizations  usually   assert  that 
they  have  been  driven   into   combination   through   the  fierceness   of 
competition;  that  without  combination  fair  earnings  on  eapital  could 
not  be  realized,  and  that  the  trust,  instead  of  being  an  aggressive 
combination,  is  really  capital  on  the  defensive.    They  also  assert  thftt 
it  is  only  through  the  power  that  comes  from  a  large  aggregation  of 
capital   that   we   are   able   to   meet   foreign   competition   in    foreign 
trade,   and   that   without   such   combination   our  export   trade   could 
not  be  well  developed,  whereas  with  the  development  of  foreign  trade 
brought  about  through  the  combination  of  capital  they  are  enabled 
to  increase  the  output  that  the  demand  for  labor  and  the  profits  of 
capital  are  both  greatly  increased.    How   far  are   these   assertions 
true? 

5.  Overcapitalization.— Most  of  the  newer  combinations  of  capital 
have  issued  large  amounts  of  stock,  common  and  preferred,  as  well 
as  of  bonds.    It  is  important,  at  least  for  the  investor,  to  know  the 
facts:    How  much  of  this  capital  is  represented  in  plant  at  a  fair 
valuation?    How  much  in  patents  or  brands?    How  much  in  good  will 
in  the  proper  sense  of  that  word?    How  much   is   "water"?    It   is 
asserted  by  some  that  no  harm  is  done  the  public  even  though  the 
capitalization  be  much  beyond   the  value  of  the   plants;   that   the 
amount  of  capitalization  has  no  effect  on  prices.    Others,  who  believe 
that  in  these  combinations  an  element  of  monopoly  is  found,  think 
that  an  attempt  to  pay  dividends  on  a  large  capitalization  does  in- 
crease prices.    One  class  of  persons  asserts  that  capital  stock  should 
be  limited  to  the  amount  of  capital  actually  paid  in  in  cash  or  in  plants 
or  goods  taken  at  a  conservative  valuation.  Another  class  believes  that 
capitalization  should  be  fixed  by  the  probable  earning  capacity  of  an 
establishment.    It  is  urged  as  an  example  that  a  newspaper  with  a 
plant  valued  at  $100,000  may  well  earn  large  dividends  on  a  million 
owing  to  the  genius  of  the  editor.    Why,  it  is  asked,  not  capitalize  at 
a  million?    But,  on  the  other  hand,  should  we  put  into  permanent 
securities  a  value  depending  on  the  power  of  one  short-lived  indi- 
vidual?   Most  people  would  readily  grant  that  genius  or  even  the 


102  TRUSTS  OR  COMPETITION f 

nerve  that  is  shown  in  investing  capital  in  new  enterprises  should 
meet  with  a  fitting  reward;  but  is  it  best  to  put  the  reward  in  that 
form? 

Again,  a  street  railway  or  a  gas  plant  which  costs  $500,000  and 
whose  franchise  has  been  given  it  may  pay  good  profits  on  one  or  two 
millions.  Is  it  in  the  public  interest  that  a  public  franchise  be 
thus  capitalized,  put  into  securities  in  private  hands  so  as  to  pay 
dividends  on  one  or  two  millions,  if  the  public  are  led  thereby  not  to 
see  the  inflation  or  to  make  the  nature  of  capitalization  of  each  or- 
ganization public,  so  that  any  investor  can  readily  learn  how  large 
a  proportion  in  every  case  is  represented  by  plant,  how  much  by 
patents  or  special  brands,  how  much  by  good  will  and  how  much  is 
nothing  but  "water"?  Would  such  knowledge  adequately  protect 
the  investor?  Would  such  knowledge,  by  inviting  competition,  if 
real  profits  were  made  public,  sufficiently  protect  the  consumer  by 
making  monopolistic  prices  impossible?  Are  the  interests  of  the  stock- 
holders and  the  interests  of  the  consumers  under  present  industrial 
conditions  the  same? 

6.  Effects  of  the  Combinations  on  Prices. — It  remains  still  to  be 
fully  established  as  to  what  the  effect  of  these  combinations  are  upon 
the  prices  of  raw  material  and  of  the  finished  products.  Are  prices 
of  raw  materials  held  lower  than  is  normal  by  the  combination? 
Are  the  prices  of  the  finished  product  lowered  or  made  higher  by 
combination?  Is  it  possible  that  competition  can  force  prices  so  low 
that  by  forcing  into  bankruptcy  large  numbers  of  establishments  the 
interests  of  the  public  will  be  seriously  injured?  And,  from  the  small 
output,  prices  even  be  put  at  length  above  combination  rates?  Is  it 
in  the  interests  of  the  laborers  and  the  public  at  large  that  the  fiercest 
competition  possible  in  prices  be  encouraged? 

Effects  on  Wages. — Despite  the  fact  that  the  wage-earners  them- 
selves seem  to  be  largely  opposed  to  the  industrial  combinations,  it 
is  often  asserted  by  the  managers  of  the  trust  that  they  have  in- 
creased the  wages  of  the  laboring  men.  Laborers  themselves  assert 
that  these  combinations  throw  many  men  out  of  employment.  They 
believe  also  that  combinations,  by  controlling  practically  all  of  the 
plants  of  any  one  industry,  are  in  much  better  condition  to  resist  the 
demands  of  labor  and  to  resist  any  pressure  that  can  be  brought  upon 
them  by  threats  of  strike.  A  strike  in  one  or  two  or  several  establish- 
ments will  not  affect  the  combination  materially,  provided  it  can 
carry  on  production  in  the  other  establishments  at  the  same  time. 
The  question  is  not  yet  settled  whether  under  the  system  of  combined 
capital  the  laborers,  by  making  also  a  thorough  combination  covering 
the  whole  of  any  one  industry,  may  not  be  even  better  able  to  deal 
with  their  employers  than  they  are  at  the  present  time.  If  their 
organization  covers  only  two  or  three  plants  they  appear  to  be  at  a 
disadvantage.  If  their  organization  covers  the  entire  industry,  can 
the  laborers  and  capitalists  then  deal  as  a  unit  in  fixing  wages  over 
the  whole  territory?  Through  their  agreements  on  wages  can  they 
more  readily  control  the  prices  to  consumers  than  has  ever  been  the 
case  before?  The  effects  of  combinations  of  capital  at  the  present  time 
upon  both  the  rate  of  wages  and  the  continuity  of  employment  need 
to  be  established;  and  a  fertile  guide  for  not  merely  speculation  but  for 


ELIMINATION  OF  MIDDLEMEN.  103 

serious  thought  remains  in  the  possibilities  for  the  future  of  such  an 
extension^  of  labor  unions  that  the  employers  and  the  employes 
throughout  an  entire  industry  can  with  little  fear  of  successful  op- 
position from  the  outside  so  control  the  industry  that  they  can  practi- 
cally fix  prices  arbitrarily.  The  effects  of  such  a  double  combination 
upon  the  consuming  community  at  large  need  also  further  study. 

Effects  on  Middlemen. — A  third  complaint  against  great  capitalistic 
organizations  comes  from  the  middlemen,  particularly  from  jobbers 
and  wholesale  dealers,  who  assert  that  the  trusts  are  eliminating  mid- 
dlemen. Is  this  elimination  of  the  middlemen,  as  well  as  the  saving 
of  labor,  to  be  considered  on  the  whole  a  gain  to  the  community  or  a 
loss?  If  the  trusts  can  deal  directly  with  two  or  three  large  jobbers, 
can  fix  their  prices  and  guarantee  their  profits,  will  there  be  enough 
saving  in  energy  to  the  community  to  make  up  for  the  loss  to  those 
who  are  driven  out  of  business  temporarily?  Will  it  also  be  possible 
within  a  comparatively  short  time  for  those  persons  whose  business 
is  thus  ruined,  as  well  for  the  laborers  who  are  driven  out  of  em- 
ployment by  the  combinaticns,  to  secure  employment  elsewhere 
through  the  added  demand  that  may  come  from  the  saving  of  cost 
and  of  labor  merely?  In  other  words,  is  the  new  form  of  organization 
a  means  of  saving  energy  comparable  with  a  new  invention  like  the 
railroad  or  the  steam  engine,  so  that  he  may  be  fairly  sure  that  though 
temporary  suffering  occurs  there  will  be  enough  saving  to  lower  prices 
and  increase  the  demand  for  goods  to  so  great  an  extent  that  the 
total  demand  for  labor  in  the  long  ran  will  be  increased?  Or,  on  the 
other  hand,  is  the  new  form  of  organization  a  conspiracy  of  the 
few  rich  and  powerful  to  oppose  the  many?  Each  view  is  taken  by 
thousands. 

7.  Legislation.— If  the  state  needs  to  interfere  in  this  modern  in- 
dustrial movement,  what  form  of  legislation  is  wisest?  Khould 
it  be  destructive  and  attempt  to  prevent  combination,  or  should  it  be 
regulative,  permitting  combination  freely,  but  attempting  so  to  con- 
trol that  evils  to  the  public  may  be  avoided?  Of  legislation  aiming 
at  destruction  we  have  had  many  examples.  The  question  still  re- 
mains unsettled  as  to  how  far  this  legislation  will  prove  effective. 
Many  points  have  been  overruled  by  the  courts;  many  have  been 
upheld;  experience  only  will  show  the  outcome  there. 

If  legislation  is  to  be  chiefly  regulative,  will  it  be  sufficient  to 
secure  publicity,  or  can  something  be  done  to  prevent  undue  raising 
of  prices?  A  second  question  of  not  less  import  is  this:  How  far 
can  such  legislation  be  national  under  the  general  provisions  of  our 
Constitution  regarding  interstate  commerce,  and  how  far  must  the 
legislation  be  state?  Could  there  be  within  a  reasonable  time  national 
incorporation  of  great  industries  over  which  the  federal  government 
should  have  sole  control?  If  so,  would  such  control  be  advisable? 
Can  congress  now,  under  our  present  Constitution,  secure  full  infor- 
mation for  public  use  regarding  the  nature  of  the  property  and  busi- 
ness of  great  corporations,  and  with  frequent  reports  regarding  the 
condition  of  the  business,  could  it  so  inspect  the  books  and  records  of 
such  organization  that  public  confidence  in  reports  would  be  as- 
sured? If  such  publicity  were  sought  through  government  would  a 
special  commissiou  or  bureau  be  needed  for  the  administrative  work? 


104  TRUSTS  OR  COMPETITION  f 

Can  any  of  the  states,  by  any  measures,  effectively  promote  the  in- 
terests of  their  citizens  without  laws  that  are  substantially  uniform 
among  them  all? 

There  are  other  problems  suggested  by  the  industrial  combination. 
I  have  mentioned  the  most  important  ones  to  which  my  attention  has 
been  called.  It  is  hoped  that  wise  and  conservative  though  bold 
action  may  in  no  long  time  solve  some  of  them. 


YALE  UNIVERSITY. 

PRESIDENT  ARTHUR  T.  HADLET. 

In  Scribner's  Magazine  for  November,  1899,  President  Hadley 
has  an  article  entitled,  "The  Formation  and  Control  of  Trusts." 
By  courtesy  of  the  author  and  of  the  publishers  of  the  magazine 
it  is  permitted  to  give  here  the  following  characterization  of  the 
paper: 

After  some  reference  to  the  magnitude  and  suddenness  of -the 
trust  development  the  author  says: 

"Under  such  circumstances,  the  question  of  industrial  con- 
solidation becomes  one  of  primary  importance.  Is  this  a  tran- 
sient movement  or  is  it  a  manifestation  of  permanent  tendencies? 
How  far  is  it  likely  to  go?  To  what  limits,  commercial  or  legal, 
is  it  subject?  How  are  its  evils  to  be  avoided?  Is  it,  as  the  so- 
cialists claim,  a  stepping-stone  toward  a  new  organization  of  in- 
dustry under  government  authority?  These  are  the  questions 
which  must  be  asked  and  answered." 

Answering  his  own  interrogatories  President  Hadley  says 
for  substance:  There  is  obviously  a  natural  limit  to  the  number 
of  these  trust  organizations — the  number  of  industries  which  it  is 
possible  to  unify  being  itself  limited.  In  large  part  the  motive 
behind  this  present  movement  is  financial  and  mercenary  rather 
than  industrial  and  economic.  Immediate  profits  for  promoters 
resulting  from  marketing  the  new  securities  easily  and  at  high 
prices  form  a  more  prominent  feature  "than  the  industrial  motive 
of  rendering  the  operations  of  the  consolidated  company  effi- 
cient." *  *  *  Those  trusts  which  are  the  legitimate  outcome 
of  a  natural  economic  tendency  will  endure,  so  that  in  any  event 
the  trust  system  involving  practical  monopolies  of  important 
industries  is  here  to  stay.  "Consolidations  which  have  been 
forced  for  selling  securities  and  deceiviig  investors  will  cease. 
But  there  will  always  remain-  a  considerable  number  which  are 
formed  for  industrial  rather  than  financial  purposes;  and  these 
will  probably  be  more  important  twenty  years  hence  than  to-Uay. 


PRESIDENT  HADLE7  OF  TALE.  105 

As  the  world  moves  on,  the  relative  economy  of  large  concerns 
cerns  is  as  marked  in  England  and  Germany  as  here.  The  author 
throughout  his  paper  unquestioningly  assumes  that  the  typical 
trust  holds  and  operates  a  working  monopoly  of  the  industry 
it  represents  and  if  well  managed  will  continue  to  enjoy  this  ad- 
makesitselt'  more  clearly  known."  The  movement  toward  large  con- 
vantage.  He  does  not  even  refer  to  the  possible  deterrent  effect 
of  potential  competition  and  merely  alludes  to  the  likelihood  of 
actual  competition  springing  up  in  the  field  occupied  by  the  trust 
in  case  trust  profits  are  phenomenal.  On  the  other  hand  he  con 
siders  the  trust  as  permanently  possessing  discretionary  power 
within  wide  limits  to  fix  prices  of  commodities.  "The  manager 
no  longer  asks  at  what  rate  others  are  selling;  he  asks  what  the 
market  will  bear.  To  answer  this  question  intelligently  he  must 
consider  the  future  development  of  the  industry  as  well  as  tLe 
present.  The  discretionary  power  which  the  absence  of  com- 
petition places  in  his  hands  constitutes  a  temptation  to  put  prices 
up  to  a  point  injurious  to  the  public  and  ruinous  to  the  perma- 
nence of  the  consolidated1  company.  Our  past  experience  with 
industrial  consolidations  proves  that  very  few  men  are  capable 
of  resisting  this  temptation  or  of  exercising  the  wider  power  over 
business  which  the  modem  system  places  in  their  hands." 

After  mentioning  the  economic  advantages  of  the  trust  sys- 
tem usually  claimed  by  trust  advocates.  President  Hadly  says  that 
the  formidable-looking  catalogue  "represents  possible  rather  than 
actual  achievement;  that  where  one  company  has  secured  these 
results,  five,  or  perhaps  ten,  have  failed  to  secure  them;  that  for 
one  combination  which  has  earned  large  profits  by  public  service 
many  have  tried  to  earn  large  profits  by  public  disservice  and 
have  frequently  ended  in  loss  to  themselves  and  to  the  public 
alike.  But  as  long  as  it  is  possible  for  a  well  managed  consoli- 
dation to  do  better  work  for  all  parties  than  could  have  been 
done  under  free  competition,  so  long  we  may  expect  to  see  the 
movement  in  this  direction  continue.  Where  there  is  real  econ- 
omy to  be  achieved,  investors  [producers?]  will  try  to  take  ad- 
vantage of  the  opportunity.  The  attempt  to  prohibit  them  from 
doing  so  is  likely  to  prove  futile.  There  is  no  better  evidence  of 
the  strength  of  the  tendency  toward  consolidation  than  is  fur- 
nished by  the  multitude  of  unenforced  laws  and  decisions  in- 
tended to  prevent  it."  *  *  *  As  to  laws  pi-ohibiting  railway 
pools  and  traffic  agreements,  "the  few  which  have  been  effective 
have  done  a  great  deal  of  harm  and  almost  no  good."  *  *  * 
The  same  possibilities  of  economy  which  first  showed  themselves 
in  railway  combination  and  consolidation  may  be  realized  also 
in  productive  industry.  There  is  every  reason  to  believe  that  the 
tendency  toward  consolidation  will  be  as  Inevitable  to  manufac- 


106  TRUSTS  OR  COMPETITION? 

turing  as  in  transportation.  As  laws  against  railway  pools  led 
to  railway  consolidation,  so  laws  against  industrial  and  trade 
combinations  will  lead  to  trusts  in  the  form  of  large  single  cor- 
porations. *  *  *  There  are  practical  limits  to  economy  of 
consolidation  more  effective  than  legal  ones,  namely,  the  great 
difficulty,  often  the  impossibility,  of  finding  men  capable  of  man- 
aging these  great  corporations.  *  *  *  To  make  matters  move 
in  the  right  direction  at  least  three  points  must  be  kept  in  view: 
(1)  Increased  responsibility  on  the  part  of  boards  of  directors. 
Speculation  in  the  securities  of  their  companies  to  the  detriment 
of  investors  and  consumers  through  artificial  fluctuations  in 
prices,  etc.,  must  cease.  (2)  A  change  in  the  legal  character  of 
the  labor  contract.  It  is  difficult  to  outline  just  what  form  this 
change  should  take,  but  monopoly  corporations  should  be  re- 
quired to  render  «ontinuous  service,  and  not  be  permitted  to  sus- 
pend that  service  because  of  avoidable  strikes,  etc.  (3)  An  in- 
creased care  in  the  imposition  of  high  import  duties.  In  all  in- 
dustries which  are  at  all  thoroughly  monopolized,  public  safety 
will  generally  demand  that  duties  be  placed  on  a  revenue  rather 
than  a  protective  basis.  *  *  *  But  there  is  a  still  deeper  ques- 
tion which  many  are  asking,  and  to  which  not  a  few  are  giving 
a  radical  answer.  Will  such  monopolies  be  long  allowed  to  re- 
main in  the  hands  of  private  corporations  at  all?  Is  it  not  rather 
true  that  this  consolidation  is  a  step  in  the  direction  of  state 
ownership  of  industrial  enterprises?  Is.  not  a  grave  crisis  at 
hand  in  which  there  will  be  decisive  struggle  between  the  forces 
of  individualism  and  socialism,  of  property  and  numbers?  *  *  * 
It  is  quite  within  the  limits  of  possibility  that  many  of  these  en- 
terprises will  pass  into  government  ownership  in  the  immediate 
future;  but  it  is  highly  improbable  that  this  tendency  toward 
consolidation  is  increasing  the  dangers  of  a  conflict  between 
individuality  and  socialism.  The  net  effect  is  to  diminish  these 
dangers  by  making  the  question  of  state  ownership  relatively 
unimportant  to  the  public  as  a  whole."  *  *  *  The  author  sums 
up  his  general  conclusions  in  these  words: 

"We  may  sum  up  our  general  conclusions  as  follows:  So  far 
as  the  present  tendency  toward  industrial  consolidation  is  a  finan- 
cial movement  for  the  sake  of  selling  securities,  it  is  likely  to  be 
short-lived.  So  far  as  it  is  an  industrial  movement  to  sec'ure 
economy  of  operation  and  commercial  policy,  it  is  likely  to  be 
permanent.  Attempts  to  stop  this  tendency  by  law  will  probably 
be  as  futile  in  the  field  of  manufacture  as  they  have  been  in  that 
of  transportation.  The  growth  of  these  enterprises  creates  a 
trust  in  a  sense  which  is  not  generally  appreciated;  it  gives  their 
managers  a  discretionary  power  to  injure  the  public  as  well  as  to 
help  it.  The  wise  exercise  of  this  trust  cannot  be  directly  provided 


TRADE  COMBINATIONS  AND  POOLS.  107 

for  by  legal  enactment;  it  must  be  the  result  of  an  educational 
process  which  can  be  furthered  by  widened  conceptions  of  di- 
rectors' responsibility.  As  this  process  of  consolidation  and  of 
education  goes  on,  private  and  public  business  tend  to  approach 
one  another  in  character.  The  question  of  state  ownership  of 
industrial  enterprises,  instead  of  becoming  an  acute  national 
issue,  as  so  many  now  expect,  will  tend  rather  to  become  relatively 
unimportant,  and  may  not  improbably  be  removed  altogether 
from  the  field  of  party  politics." 

TRADE  COMBINATIONS  GENERALLY. 

In  his  standard  work,  "Economics"  (G.  P.  Putnam's  Sons, 
New  York,  1897),  on  page  155  and  following,  President  Hadley 
says: 

"The  simplest  form  of  combination  is  an  agreement  to  main- 
tain rates  where  the  several  competitors  promise  not  to  reduce 
their  prices  below  a  scale  fixed  by  common  consent,  with  a 
view  to  giving  producers  a  fair  profit.  But  such  an  arrangement 
rarely  proves  effective.  Each  company  is  at  the  mercy  of  its 
agents.  They  will  try  to  steal  business  from  rival  concerns  by 
cutting  rates.  If  they  are  allowed  a  commission  on  sales,  they 
will  divide  it  with  the  buyer;  if  they  are  not  allowed  such 
a  commission  they  will  find  a  hundred  different  ways,  less 
obvious  but  hardly  less  effective,  of  rendering  a  rate  agreement 
nugatory. 

*  *  *  "When  competing  concerns  are  thus  at  the  mercy 
of  their  agents  or  of  outsiders,  a  resort  to  closer  forms  of  com- 
bination is  inevitable.  If  it  proves  that  an  agreement  to  main- 
tain rates  is  not  enough,  they  will  arrange  a  pool  or  division 
of  traffic." 

After  mentioning  the  three  kinds  of  pools:  (1)  A  geographical 
division  of  the  territory  as  by  competing  railroad  or  gas  com- 
panies; (2)  a  division  of  traffic;  (3)  a  division  of  the  earnings  from 
the  combined  traffic,  President  Hadley  continues: 

"Pools  have  not  been  regarded  with  favor  by  the  law.  In 
the  United  States  they  are  treated  as  contracts  in  restraint  of 
trade,  and  therefore  void  as  a  gambling  contract  would  be 
void.  The  courts  say  that  they  are  against  public  policy  apd 
will  not  aid  in  their  enforcement.  In  England,  the  legal  decisions 
are  much  more  favorable  to  pools  than  in  the  United  States; 
while  in  most  parts  of  continental  Europe  they  are  accepted 
as  matters  of  course;  the  governments  themselves  entering  into 
pooling  contracts  with  private  companies  with  which  they  find 
themselves  brought  into  competition  in  the  management  of  state 
railroads  or  other  Industrial  enterprises. 


108  TRUSTS  OR  COMPETITION? 

"In  certain  kinds  of  business,  notably  railroad  transportation 
(in  the  United  States),  such  pools  or  combinations  are  treated 
as  misdemeanors  and  an  attempt  is  made  to  punish  their 
promoters  by  fine  or  imprisonment;  but  these  efforts  to  do  away 
with  pools  have  conspicuously  failed  of  their  object.  There  are 
many  ways  of  evading  them.  A  joint  accounting  office  may 
take  the  form  of  a  clearing  house  established  for  the  con- 
venience of  the  public,  and  yet  may  serve  all  the  purposes  of  a 
pool. 

INDUSTRIAL  CONSOLIDATIONS. 

"The  attempt  to  prohibit  combination  has  proved  futile,  and 
has  simply  driven  the  competing  concerns  into  closer  consolida- 
tion. Had  it  been  successful,  it  must  either  have  retarded  the 
development  of  modern  business,  and  the  utilization  of  modern 
methods  requiring  concentrated  management  of  capital,  or  it 
must  have  subjected  all  of  our  large  industries  to  constant 
fluctuations  in  their  scale  of  prices,  which  would  have  been 
hardly  less  disastrous  to  the  consumer  than  to  the  investor. 
But  the  advantages  of  industrial  combination,  when  it  comes  to 
Include  all  competitors,  are  frequently  balanced  by  the  evils  of 
commercial  combination.  The  economy  connected  with  the  use 
of  concentrated  capital  is  in  some  measure  offset  by  the  loss  of 
that  stimulus  which  competition  alone  seems  able  to  give;  and 
the  resulting  monopoly  makes  it  uncertain  whether  the  con- 
sumers will  get  the  benefit  of  the  economy  which  is  actually 
obtained. 

"If  a  monopoly  is  managed  by  inexperienced  hands,  the  effort 
to  put  prices  up  is  usually  more  noticeable  than  the  effort 
to  put  expenses  down.  It  seems  so  easy  to  make  a  profit  at  the 
expense  of  society,  that  managers  are  apt  to  neglect  the  more 
laborious  method  of  making  a  profit  by  service  to  society.  When 
business  men  have  been  all  their  'lives  accustomed  to  face 
Immediate  competition,  they  think  that  the  combination  of  all 
competitors  removes  the  only  effectual  restriction  upon  charges. 
But  this  is  a  short-sighted  view  of  the  matter  which  has  wrecked 
most  of  the  enterprises  run  on  such  a  basis,  and  has  made  the 
average  trade  combination  a  means  of  hindering  rather  than 
helping  its  members.  If  the  managers  of  a  combination  make 
It  their  chief  concern  to  suppress  competition  rather  than  to 
realize  economies  in  production,  their  policy  toward  trade  rivals 
results  in  violation  of  commercial  morality,  if  not  of  commercial 
law.  Not  content  with  obtaining  unfair  advantages  in  the  way 
of  discriminating  rates  for  the  transportation  of  its  goods,  the 
combination  tries  to  exclude  its  rivals  from  their  accustomed 
markets  by  methods  of  boycotting  and  intimidation,  which,  when 
they  are  used  by  trades  unions,  provoke  fierce  denunciation 


PRICES   UNDER  MONOPOLIES.  109 

from  the  same  men  who  have  been  ready  to  practice  them  tor 
their  own  advantage.  It  is  interesting  to  see  how  combinations 
of  capital  and  combinations  of  labor  are  subject  to  the  same 
possibilities  of  abuse  or  mismanagement;  and  how  the  same 
violation  of  commercial  right  looks  excusable  to  the  party  bene- 
fited, but  monstrous  to  the  party  injured. 

TRUST  MONOPOLIES  AND  PRICES. 

"It  pays  in  the  long  run  to  bring  rates  down  very  near 
to  the  limits  of  actual  cost  if  such  reductions  are  followed  by  a 
large  development  of  traffic.  Where  a  monopoly  is  of  such 
precarious  character  that  it  may  be  subjected  to  direct  com- 
petition at  almost  any  moment,  this  truth  is  sufficiently  obvious. 
If  a  concern  in  this  situation  attempts  to  do  a  small  business 
at  high  rates  and  make  large  temporary  profit  by  such  a  policy, 
new  capital  will  come  into  the  business  in  the  hope  of  securing 
the  good-will  and  custom  of  the  community  by  lower  rates. 
High  charges  invite  duplication  of  plant  in  all  cases  where 
such  duplication  is  possible.  *  *  *  When  permanent  monopoly 
rights  are  guaranteed  by  law  in  all  the  competing  districts,  as 
on  French  railroads,  we  are  apt  to  find  a  system  of  high  charges 
which  no  nominal  powers  of  public  supervision  prove  adequate 
to  control.  *  *  *  Among  those  trusts  and  other  combinations 
that  have  had  apparently  a  complete  monopoly,  a  large  number 
have  made  conspicuous  failures,  simply  because  they  thought 
of  high  prices  rather  than  large  sales,  and  did  not  see  that 
such  a  policy  was  suicidal.  *  *  *  If  a  large  industrial  com- 
bination uses  the  advantages  given  by  concentration  of  capital 
to  render  labor  more  efficient  and  obtain  a  good  profit  at  low 
rates,  it  has  excellent  chances  of  success.  But  if  it  makes  such 
economy  of  labor  a  pretext  instead  of  an  object,  and  uses  its 
monopoly  to  put  prices  up  the  danger  of  failure  is  wholly  dis- 
proportionate to  the  chances  of  success.  Such  a  policy  may  suc- 
ceed for  a  few  years,  but  sooner  or  later  it  seems  bound  to  ruin 
those  who  adopt  it. 

CAN    MONOPOLIES    BE    TRUSTED    WITH    CONTROL    OF    PRICES? 

"Can  we  trust  the  managers  of  our  large  industrial  enter- 
prises to  see  this  for  themselves?  Can  we  treat  their  mistakes 
as  a  self-correcting  evil,  and  wait  quietly  for  the  time  when 
they  shall  learn  that  their  own  permanent  interests  are  best 
served  by  doing  good  public  service?  To  this  question  it  is 
impossible  to  return  a  general  answer.  Our  decision  in  any 
particular  case  will  depend  partly  upon  the  character  of  the 
business  involved,  partly  upon  the  intelligence  of  those  who 


110  TRUSTS  OR  COMPETITIONf 

manage  it,  and  most  of  all,  perhaps,  on  our  own  habits  of  mind. 
If  we  are  in  the  habit  of  looking  at  direct  consequences  and 
disregarding  indirect  ones,  we  shall  see  grounds  for  active  public 
interference  in  almost  all  cases  of  industrial  combination.  The 
managers  of  a  monopoly  have  it  in  their  power  to  do  a  great 
deal  of  harm  before  they  begin  to  feel  the  loss  to  themselves 
which  arises  from  the  adoption  of  a  short-sighted  policy.  Even 
if  the  trouble  corrects  itself  in  fhe  long  run,  a  great  many 
legitimate  interests  are  sacrificed  in  the  process.  A  railroad 
ultimately  finds  it  suicidal  to  kill  the  local  shippers  who  are  its 
best  permanent  customers;  but  it  is  small  cornrort  to  the  ship- 
pers to  know  that  their  deaths  are  to  be  slowly  avenged  by  the 
operation  of  economic  laws.  The  shippers  demand  some  imme- 
diate control  over  the  railroad  agent;  something  which  will 
prevent  the  evil  in  the  beginning,  instead  of  simply  sufficing  to 
prevent  its  indefinite  repetition.  They  will  be  prone  to  adopt 
the  socialistic  solution  of  the  problem  and  insist  that  the  govern- 
ment should  own  the  railroad,  as  the  surest  means  of  avoiding 
such  abuses. 

"But  the  man  who  is  in  the  habit  of  looking  at  indirect  con- 
sequences will  see  that  the  undiscriminating  attempt  to  prevent 
evil  often  results  ia  preventing  an  even  greater  amount  of  good. 
He  will  be  prone  to  take  the  individualistic  view  of  the  matter. 
He  will  be  disinclined,  except  as  a  last  resort,  to  put  the  business 
into  the  hands  of  a  government  whose  agents  are  almost  always 
chosen  on  other  grounds  than  those  of  industrial  efficiency,  and 
whose  methods  are  much  less  flexible  than  those  of  a  private 
corporation.  He  will  be  indisposed  to  see  stringent  regulations 
put  in  force  until  he  is  convinced  that  milder  remedies  are  in- 
adequate to  protect  the  interests  of  the  public  as  a  whole. 

METHODS  OF  REGULATING  MONOPOLIES. 

*  *  *  "We  have  here  to  consider  the  merits  of  various 
methods  of  regulation  of  such  industries,  where  government 
ownership  proves  undesirable  or  impracticable.  These  may  be 
grouped  under  three  heads:  (1)  Limitation  of  profits;  (2)  fixing  of 
rates  by  public  authority;  (3)  enforcement  of  far-sighted  methods 
of  management.  The  first  of  these  methods  looks  much  better 
than  it  really  is.  It  is  a  favorite  remedy  of  people  who  have 
had  no  practical  experience  of  its  working.  They  say  it  is  very 
unjust  for  a  monopoly  to  obtain  a  much  higher  dividend  thaii 
would  be  possible  under  free  competition;  and  they  think  that  if 
we  limit  the  dividend  we  shuil  remove  the  motive  for  extortion. 
In  practice,  the  matter  does  not  work  in  tliis  way.  Laws  limit- 
ing profits,  if  obeyed,  tend  to  keep  rates  high  instead  of  low; 


METHODS  OF  REGULATING  MONOPOLIES.  Ill 

if  evaded,  they  substitute  a  crooked  method  of  distribution  for 
a  straight  one.  *  *  *  Lord  Farrer,  whose  long  experience  as 
Secretary  of  the  Board  of  Trade,  gave  him  unique  opportunities 
for  observing  the  effects  of  various  methods  of  regulation  prac- 
ticed in  England,  says  that  limitation  of  profits  does  not  cause 
reduction  in  rates;  and  that  in  trying  to  apply  this  principle 
Parliament  has  gone  on  a  wrong  tack,  and  involved  the  country 
in  a  "maze  of  absurdities." 

*  *  *  "If  laws  limiting  profits  are  evaded  instead  of  being 
obeyed,  the  effects,  though  different  in  kind,  are  equally  un- 
desirable. It  is  easy  to  reduce  profits  by  extravagance  in  man- 
agement, or  by  giving  officials  large  salaries.  This  does  no  good 
to  the  consumer,  and  positive  harm  to  the  investor.  Such  laws 
may  also  be  evaded  by  inflating  the  company's  capital  account; 
a  practice  known  as  stock-watering.  If  a  corporation  is  allowed 
to  divide  all  the  money  that  it  makes,  there  is  no  temptation  to 
honest  managers  to  create  a  fictitious  capital  account.  But  if  the 
dividends  are  arbitrarily  limited  to  8  per  cent  when  the  com- 
pany is  really  earning  12,  the  directors  are  tempted  to  pretend 
that  there  has  been  an  investment  of  capital  one  and  one-half 
times  as  great  as  has  been  actually  expended.  On  the  basis  of 
this  supposed  investment  they  issue  a  stock  dividend  of  50 
per  cent.  This  is  in  common  language  'water.'  It  does  not 
represent  money  actually  paid  in.  *  *  *  If  companies  begin 
to  issue  fictitious  capital  there  is  no  limit  to  such  issue.  A 
false  capital  account  gives  opportunity  for  every  kind  of  stock 
speculation,  and  for  all  sorts  of  illegitimate  methods  of  control 
by  financial  operators.  Many  attempts  have  been  made  to  pro- 
hibit stock- watering;  but  as  long  as  limitation  of  profits  is  at- 
tempted, there  are  enough  honest  men  who  are  interested  in  the 
more  defensible  forms  of  stock-watering  to  render  it  almost 
impossible  to  detect  and  punish  the  indefensible  ones.  The  evil 
from  this  source  alone  far  outweighs  any  good  that  has  ever 
been  obtained  by  trying  to  limit  dividends. 

"Some  charters,  especially  in  England,  try  to  combine  limita- 
tion of  profits  with  limitation  of  rates  by  providing  that  when- 
ever the  profit  exceeds  a  specified  percentage,  the  charges  for 
services  shall  be  correspondingly  reduced.  Others  (like  those 
of  the  French  railroads)  provide  that  all  dividends  above  a 
certain  figure  shall  be  shared  with  the  government.  Neither  of 
these  systems  has  won  its  way  into  general  recognition. 

"By  limiting  rates  instead  of  profits  we  have  a  somewhat 
more  effective  means  of  control.  It  has  the  merit  of  aiming 
at  the  right  target,  whether  it  hits  it  or  not.  Its  chief  diffi- 
culties are  connected  with  the  complexity  of  the  conditions 
affecting  modern  traffic.  It  is  seldom  possible  to  say  what  any 


112 

specific  piece  of  work  really  costs  a  large  concern.  The  cost 
depends  upon  the  amount  of  work  done.  The  larger  the  invest- 
ment of  capital  the  more  complete  is  this  dependence  of  cost 
upon  quantify.  *  *  *  In  fact,  the  chief  means  which  a  manu- 
facturer possesses  for  reducing  costs  is  to  increase  the  number 
of  his  sales  so  as  to  make  it  possible  to  lower  this  item  of 
expense  ["overhead  charges,"  such  as  interest,  insurance,  taxes 
and  general  maintenance,  which  are  *bout  the  same  whether 
production  be  large  or  small].  This  is  the  really  critical  element 
in  price  determination  in  all  cases  where  large  amounts  of  capi- 
tal are  involved;  and  it  is  precisely  this  which  public  authorities 
are  unable  to  determine  in  advance,  because  it  is  essentially 
speculative  in  its  character.  Of  course,  the  business  meii  them- 
selves have  the  same  difficulty;  but  they  are  experimenting 
with  their  own  capital,  at  their  own  risk,  and  in  lines  where 
they  have  the  maximum  technical  knowledge;  while  the  govern- 
ment authorities,  dealing  with  the  capital  of  others  and  the  re- 
sults of  others'  experience,  find  themselves  sorely  perplexed. 
*  *  *  Where  state  ownership  is  impracticable  and  private  en- 
terprise short-sighted  and  extortionate,  laws  fixing  rates  may 
be  the  best  available  resource  for  the  protection  of  the  public; 
but  their  operation  is,  in  almost  all  cases,  rather  unsatisfac- 
tory. 


COLUMBIA  UNIVERSITY. 

PKOFEBSOB  JAMES  BATES  CLARK. 

[The  following  paper  is  substantially  Prof.  Clark's  brief 
address  before  the  Chicago  Trust  Conference,  but  subsequently 
somewhat  elaborated  at  my  request  so  as  to  give  more  fully 
the  author's  view  as  to  remedial  measures. — The  Editor.] 

I  accept  and  use  the  popular  definition  of  the  term  "trust" 
It  is  any  corporation  that  is  large  enough  to  be  menacing;  it 
is  a 'company  that  produces  a  large  enough  share  of  the  entire 
output  of  some  commodity  to  enable  it  to  have  some  monopolis- 
tic power,  as  things  now  are,  and  thereafter  to  keep  it.  There 
is  an  intermediate  type  of  trust  which  can  be  crushed  out  of 
existence  far  more  easily  by  legislation  than  the  trust  which 
is  the  true  corporation.  You  may  get  rid  of  unions  of  different 
companies,  each  of  which  retains  its  separate  existence;  but  you 
will  still  have  the  trusts  to  deal  with  in  the  consolidated  form. 
There  are  three  things  that  are  confounded  in  the  public  mind. 
They  are,  capitalization  as  such,  centralization  and  monopoly. 
There  is  a  striking  difference  between  them;  and  the  real  line 


PROFESSOR  CLARK  OF  COLUMBIA.  113 

between  the  parties  that  loosely  call  themselves  Pro-Trust  and 
Anti-Trust  is  drawn  by  the  manner  of  treating  centralization. 
I  wish  to  record  my  conviction  that  centralization  is  a  beneficent 
and  permanent  thing  and  that  monopoly  is  evil  and  almost 
wholly  evil.  If  we  cannot  have  centralization  without  monopoly, 
we  ought  to  forfeit  some  of  the  benefits  of  the  concentration 
itself,  as  the  price  that  we  would  pay  for  getting  rid  of  the 
evil— monopoly.  If  we  can  have  centralization  without  monopoly 
we  should  have  it  and  thrive  under  it. 

It  is  early  to  hope  for  much  attention  to  the  type  of  treat- 
ment that  the  trust  will  ultimately  receive.  I  hazard  the  pre- 
diction that  legislation  will,  in  the  end,  draw  the  line  of  cleavage 
between  centralization  and  monopoly  and  not  between  capital 
and  centralization.  We  should  not  attack  capital,  in  any  case; 
and,  to  do  justice  to  the  anti-trust  laws,  they  do  not  attack 
capital  as  such,  they  attack  centralization.  In  the  long  run  I 
venture  to  say  that  we  shall  find  that  the  futility  of  these  laws 
is  the  best  thing  about  them.  If  we  actually  could  crush  civiliza- 
tion, for  the  sake  of  crushing  the  monopoly  that  is  sometimes 
associated  with  it,  we  should  do  ourselves  an  amount  of  harm 
that  we  should  regret  indefinitely  in  the  years  that  are  to  come. 
Do  you  suppose  that,  in  the  fierce  competition  now  begun 
between  America  and  other  countries  for  the  trade  6"f  the  East, 
do  you  suppose  that  in  the  fiercer  competition  that  will  follow 
between  America  and  Europe  on  the  one  hand,  and  the  whole 
East  on  the  other,  for  the  trade  of  the  world,  we  can  afford 
to  sacrifice  the  advantage  that  comes  from  making  things  in 
great  establishments?  You  may  say  we  can,  but  practically 
we  cannot  if  we  are  to  enjoy  the  benefits  that  come  from 
economic  leadership. 

In  this  competition  for  the  trade  of  the  world,  I  want  my 
country  to  come  uppermost:  and  there  is  only  one  way  in  which 
it  can  do  it  without  sacrificing  its  citizens.  That  is,  by  develop- 
ing to  the  utmost  its  producing  power. 

There  is  competing  power  in  cheap  labor;  but  there  is  a  bet- 
ter kind  of  competing  power  in  efficient  labor— in  work  that 
produces  much  because  it  is  organized  and  supplied  with  the 
best  tools.  The  coming  struggle  is  between  the  competing  power 
residing  here  and  based  upon  productive  energy,  and  the  com- 
peting power  residing  in  the  East  and  based  upon  poverty.  It 
is  machines  and  big  mills  against  "pauper  labor;"  and  the  power 
that  is  based  upon  energy  will  be  the  one  that  will  survive. 

Is  it  possible  for  us  to  retain  our  centralization  and  sup- 
press the  evil  of  monopoly?  I  must  question  the  wisdom  of 
trying  in  this  brief  space  to  give  the  reasons  for  believing 
that  it  is  so.  I  rely  upon  the  lapse  of  time  to  produce  conviction; 


114  TRUSTS  OR  COMPETITION? 

and  fortunately  the  lapse  of  time  will  not  have  to  be  great. 
Why  is  it  almost  an  open  question  now  whether  trusts  do  or 
do  not  raise  prices?  Why  is  it  the  fact  that  they  do  not  raise 
them  as  much  as  we  once  thought  they  would?  Is  it  a  benevo- 
lent impulse  that  restrains  them?  Are  they  filled  with  the  en- 
thusiasm of  humanity?  Are  they  a  lamblike  people  who  on  no 
account  would  harm  the  consumer?  Have  they  conscientious 
scruples  against  accumulating  property  and  making  large  divi- 
dends? They  don't  raise  prices  to  still  higher  levels  because 
they  cannot;  and  why  this  is  the  case  the  public  doesn't  exactly 
know.  That  they  cannot  raise  prices  beyond  certain  limits 
appears  in  the  records  of  price  quotations  since  trusts  began. 
They  can  do  it  somewhat,  but  why  not  more?  There  is  an 
explanation;  and  it  lies  in  the  power  of  what  is  now  termed 
"potential  competition;"  it  is  the  fact  that  high  prices  will  call 
new  establishments  into  existence,  that  forestalls  and  prevents 
any  great  raising  of  prices.  The  man  who  can  build  a  mill  if 
he  will  and  who  will  if  the  inducement  is  great,  who  is  already 
the  potential  competitor,  suppresses  high  prices  in  advance.  The 
producer  who  is  not  now  in  the  field  but  will  instantly  enter 
it  if  prices  are  raised  is  the  protector  of  the  public. 

In  lucid  intervals,  in  which  it  is  customary  for  the  man- 
agers of  trusts  to  tell  the  truth  to  the  people,  this  is  dne  of 
the  things  which  they  invariably  tell— the  power  they  are  afraid 
of  resides  in  the  potential  competitor.  This  is,  however,  by  110 
means  the  restrainer  of  prices  it  ought  to  be,  or  that  it  easily 
can  be.  That  it  is  powerful,  far  beyond  the  imagination  t>f 
those  who  looked  upon  the  early  development  of  trusts,  is  per- 
fectly evident  from  the  narrow  limits  within  which  prices  have 
been  raised.  The  foreign  competitor,  kept  out  by  the  tariff,  is 
a  potential  competitor  who  may  be  made  to  become  an  actual 
one.  I  am  not  one  of  those  harmless  theorists  who  propose  to 
abolish  the  whole  protective  tariff,  but  I  would  use  the  utmost 
discrimination  I  could  bring  into  the  service  to  manipulate  that 
tariff  in  such  a  way  that  it  should  not  be  a  bulwark  of  trusts. 
I  would  open  the  way  to  the  foreign  competitor  in  those  in- 
stances where  the  tariff  is  not  in  the  least  necessary  for  the 
industry  as  such,  but  is  necessary  for  the  trusts  within  the 
industry.  The  man  whom  the  trust  has  scared  off  by  its  com- 
mand of  patents  is  a  potential  competitor,  not  an  actual  one. 
A  very  wise  and  careful  change  of  our  patent  laws  will  make 
him  a  real  power;  and,  while  I  have  not  now  a  moment  to  spend 
in  describing  what  should  be  the  change  that  would  be  wise 
and  careful,  I  say  that  sooner  or  later  the  patent  laws  must 
be  changed  for  this  purpose — that  of  liberating  competition  while 
still  stimulating  invention. 


THE  TRUST'S  SPECIAL  WEAPON.  115 

There  is  another  type  of  legislation  more  important  than 
either  of  these  and  far  more  effectual;  and  in  proportion  to  its 
value  is  the  difficulty  of  it.  If  by  reason  of  the  difficulty  my 
program  should,  at  this  early  stage,  be  ruled  out  of  court,  I  will 
wait  with  patience  for  the  time  when,  by  reason  of  the  progress 
of  events,  it  will  make  its  way  into  the  court  again. 

The  special  weapon  of  the  trust  is  discrimination  in  prices. 
There  are,  of  course,  discriminations  in  railroad  rates,  a  most 
important  type  of  unequal  and  unfair  dealing;  but  that  subject 
has  been  sufficiently  treated.  Discrimination  in  the  prices  of 
trust-made  articles  is  a  point  even  more  dangerous  than  the 
unequal  railroad  rates,  and  even  more  difficult  to  suppress.  If 
a  trust  can  come  into  my  territory  and  sell  goods  at  ruinous 
prices,  while  sustaining  itself  and  making  profits  in  another 
territory,  it  can  crush  me  with  ease;  and  by  threatening  to 
treat  in  the  same  way  anyone  else  who  may  take  my  place,  it 
may  terrorize  potential  competitors  into  remaining  inactive. 

So  long  as  the  trust  has  such  a  power  the  influence  of  poten- 
tial competition  is  far  from  being  all  that  is  needed  for  the  pro- 
tection of  consumers  and  of  the  -majority  of  laborers.  More- 
over, there  are  other  kinds  of  discrimination  that  are  resorted 
to  by  trusts  for  securing!  unfair  advantages  in  the  struggle 
with  independent  producers.  There  is  the  plan  of  reducing  the 
price  of  one  type  of  goods,  such  as  a  competitor  makes,  and 
keeping  up  the  prices  of  numerous  other  types  of  goods  which 
the  trust  makes.  There  is  the  "factor's  agreement,"  with  the 
clause  that  binds  the  merchant  who  handles  trust-made  goods 
to  refuse  to  handle  any  others.  Particularly  efficient,  oppressive, 
and,  in  spirit,  illegal,  is  this  last  measure. 

Can  we  prevent  these  things?  If  we  must,  we  can;  and  it 
is  clear  that  we  must.  It  will  require  a  federal  law  to  do  it 
effectively;  and  it  will  require  an  amendment  of  the  constitu- 
tion to  open  the  way  for  the  law.  The  law,  when  we  get  it, 
will  be  difficult  of  enforcement;  but  we  must  overcome  that 
difficulty,  for  the  alternative  is  something  that  we  cannot  tol- 
erate— a  regime  of  permanent  monopoly.  We  must  force  the 
trusts  to  treat  customers  alike.  We  must  put  every  one  of  these 
customers  under  what,  in  diplomacy,  would  be  called  a  "most 
favored  nation  clause,"  and  must  make  them  give  to  customers 
everywhere  prices  as  low  as,  for  competing  purposes,  they  may 
choose  to  make  anywhere.  If,  then,  to  ruin  me,  a  trust  shall 
make  prices  that  are  below  the  cost  of  production,  it  must  make 
the  cut  apply  to  its  entire  output.  If  it  does  that,  it  may  be  that 
I  can  hold  out  as  long  as  can  the  great  corporation,  its  losses 
will  exceed  mine  as  much  as  does  its  capital  and  volume  of 
production.  We  must  destroy  the  power  to  boycott  customers 


116  TRUSTS  OR  COMPETITION? 

for  the  offense  of  handling  independent  producers'  goods.  A 
fair  field  and  no  favor  is  what  we  must  get  for  the  competitor; 
and  then,  even  before  he  enters  the  field,  his  latent  power  will 
restrain  the  trust  and  protect  the  public. 

What  are  the  possibilities  of  potential  competition?  Far 
more,  as  with  more  time,  I  could  show,  than  it  has  yet  accom- 
plished, and  enough  to  make  sure  that,  though  we  shall  tave 
great  corporations  forever,  we  shall  not  have  monopolies.  With 
such  legal  ability  as  our  country  possesses,  and  with  such  moral 
energy  as  in  this  cause  it  is  showing,  we  can  sooner  or  later  make 
and  execute  the  laws  that  will  give  fuller  efficiency  to  this  force, 
which  is  already  so  powerful,  and  insure  that  happy  combina- 
tion, which  I  have  faith  to  believe  our  country  will  secure,  of 
a  productive  ability  that  will  give  us  the  command  of  the 
markets  of  the  world,  and  justice,  which  will  develop  the  man- 
hood and  insure  the  contentment  of  our  citizens. 


UNIVERSITY  OF  MICHIGAN. 

PROFESSOR  HENRY  CARTER  ADAMS  before  the  Chicago  Trust  Conference. 

I  have  been  requested  to  undertake  a  statement  of  the  questions 
that  arise  in  the  consideration  of  the  trust  problem.  In  doing  this  I 
can  say  nothing  that  is  new,  nor  shall  it  be  my  aim  to  be  exhaustive. 
It  is  possible,  however,  that  questions  which  are  familiar  may  pre- 
sent themselves  in  a  new  light  when  brought  together  in  a  single 
statement. 

Whatever  the  trust  problem  may  be,  it  has  to  do  with  business 
organization,  and  on  this  account  the  first  question  that  suggests 
itself  is  one  that  pertains  to  the  science  of  economics.  We  observe 
in  almost  every  form  of  business  that  industrial  power  is  concen- 
trating itself,  that  organizations  are  growing  in  size,  that  individual 
and  small  enterprises  are  being  crowded  to  the  wall,  and  that  the 
sphere  of  competition  is  constantly  being  narrowed.  This  tendency 
is  opposed  to  the  theory  upon  which  our  system  of  jurisprudence  rests, 
and  it  is  pertinent  to  inquire  whether  it  is  inherent  in  the  nature  of  the 
industries  that  are  thus  tending  toward  consolidation,  or  whether  its 
explanation  is  to  be  found  in  the  peculiar  conditions  under  which 
industry  at  the  present  time  is  carried  on.  This  is  a  most  impor- 
tant question,  for  if  the  tendency  toward  consolidation  be  natural, 
remedial  legislation  should  address  itself  to  the  control  of  the  in- 
dustrial forces  thus  brought  together.  If,  on  the  other  hand,  this 
tendency  be  artificial,  the  legislature,  in  dealing  with  the  situation, 
must  seek  to  restore  those  conditions  under  which  individual  enter- 
prise may  be  able  to  maintain  itself.  Without  undertaking  the 
analysis  of  industrial  conditions  and  motives  which  a  consideratioa 
of  this  question  involves,  I  shall  state  at  once  what  seems  to  be  the 
correct  opinion  upon  this  subject 


A  LIMIT  TO  ECONOMY  IN  PRODUCTION.  117 

TWO  CLASSES  OF  INDUSTRIES. 

Industries  are  not  all  of  the  same  kind.  They  do  not  all  possess 
the  same  character.  Some  tend  toward  consolidation  and  combina- 
tion, while  others  are  well  fitted  by  their  character  to  continue  a 
separate  and  competitive  existence.  The  transportation  industries 
are  of  the  former  class.  The  manufacturing  industries  are,  speaking 
generally,  of  the  latter  class. 

Railways  by  their  very  nature  tend  toward  combinations  and 
consolidation.  The  biscuit  industry,  the  manufacture  of  nails,  the 
refining  of  oil,  on  the  other  hand,  are  well  fitted  for  individual  man- 
agement and  administration.  If  these  latter,  like  the  former,  show 
a  tendency  toward  consolidation,  the  explanation  will  be  found  in 
the  peculiar  conditions  under  which  they  are  carried  on.  Thus  again, 
upon  the  threshhold  of  this  discussion,  do  we  discover  the  imperative 
necessity  of  industrial  analysis  as  a  guide  to  right  policy  and  sound 
legislation.  Before  coming  to  the  question  of  general  policy,  there 
is  another  question  which  will  undoubtedly  be  made  the  sub- 
ject of  warm  discussion  by  the  convention.  Are  the  combina- 
tions commonly  called  trusts  advantageous  or  disadvantageous? 
Is  the  tendency  toward  consolidation  one  to  be  approved  or  dis- 
approved? It  is  likely  that  this  discussion  will  turn  upon  three 
points:  First,  Does  consolidation  of  manufacturing  industries  tend 
toward  the  reduction  of  cost?  Second,  Will  manufacturing  under 
trusts,  by  measuring  the  output  to  the  current  demand,  tend  to 
guard  society  from  the  evils  of  commercial  panics  and  commercial 
depressions?  And  lastly,  Is  this  new  organization  of  industry  in 
harmony  with  a  democratic  organization  of  society?  Here  again  I 
must  ask  the  privilege  of  expressing  an  opinion,  as  the  time  allotted 
this  paper  does  not  permit  a  full  statement  of  the  reasons  upon 
which  my  opinion  rests. 

REDUCED  COST  AND  REGULATED  PRODUCTION. 

It  is  common  to  say  that  increase  in  the  size  of  manufacturing 
plant  permits  the  production  of  commodities  at  less  cost  than  would 
otherwise  be  the  case.  There  is  undoubtedly  some  truth  in  this 
statement.  The  development  of  machinery  has  gone  hand  in  hand 
with  the  growth  of  factories,  and  as  a  result  the  product  is  furnished 
at  a  cheapened  rate.  But  there  is  a  limit  to  the  application  of  this 
rule.  Every  manufacturing  industry,  considered  from  the  point  of 
view  of  production,  has  at  any  particular  time  a  size  which  may  be 
regarded  as  its  normal  size  of  maximum  efficiency.  This  normal  of 
maximum  efficiency  is  determined  by  the  extent  to  which  division  of 
labor  and  the  use  of  machinery  can  be  applied.  To  increase  such  an 
industry  by  one-half  would  not  result  in  a  decrease  of  the  cost  of 
manufacture,  for  it  would  occasion  a  less  effective  application  of  the 
principle  of  division  of  labor. 

While,  therefore,  it  is  true  that  the  concentration  of  capital  and 
labor  under  a  single  direction  is  followed  by  economy  up  to  a  certain 
point,  it  is  not  true  that  combination  and  concentration  beyond  thnt 
point  tend  to  reduce  the  cost  of  the  production.  He  who  accepts  this 
statement  of  the  case  must/  conclude  that  manufacturing  combina- 


118  TRUSTS  OR  COMPETITION? 

tions,  I  say  nothing  of  other  forms,  contribute  nothing  to  the  reduction 
of  the  cost  of  manufacture  beyond  what  would  be  contributed  should 
each  of  the  industries  continue  its  independent  competitive  existence. 
This  is  a  curt  answer  to  a  profound  question,  but  it  is  believed  to  rest 
upon  sound  analysis  and  to  lead  to  the  conclusion  that  the  motive  to 
a  trust  organization  of  manufacturing  industries  is  not  found  in  a 
desire  to  benefit  the  public  by  the  reduction  of  cost. 

It  is  not  so  difficult  to  suggest  the  line  of  reasoning  upon  the 
second  question  submitted.  The  chief  argument  in  favor  of  combina- 
tion among  producers  is  that  by  this  means  production  will  be  meas- 
ured to  demand,  and  consequently  there  will  be  no  overstocking  of  the 
market,  no  commercial  depression  and  no  commercial  panics,  I 
shall  not  undertake  to  argue  this  proposition,  but  content  myself 
with  a  single  comment.  Opposed  to  this  theory  of  commercial  depres- 
sions stands  the  well-wrought  theory  of  socialistic  writers  which  rests 
upon  the  claim  that  a  stocked  market  is  due  to  an  uneconomic  dis- 
tribution of  values,  and  not  to  an  overproduction  of  goods.  It  certainly 
is  true  that  goods  cannot  be  sold  when  the  property  in  the  goods, 
as  also  money  with  which  to  purchase  them,  is  in  the  same  hands. 
A  steady  market  implies  an  equation  between  goods  on  the  one  hand 
and  purchasing  power  in  the  hands  of  those  for  whom  the  goods  are 
made  on  the  other.  You  perceive  at  once  the  bearing  of  this  line  of 
reasoning  upon  the  claim  that  combinations  tend  to  steadiness  of 
trade.  An  adjustment  of  the  output  to  the  current  effective  demand 
is  of  the  utmost  importance.  It  may  be  questioned,  however,  whether 
a  yet  further  concentration  of  industrial  power  than  that  which  now 
exists  is  the  best  means  of  attaining  this  result. 

SOCIAL  AND   POLITICAL  RESULTS  OF  TRUSTS. 

In  addition  to  these  purely  industrial  considerations  it  is  necessary 
to  inquire  respecting  the  general  social  and  political  results  of  trust 
organizations  before  one  can  accept  them  as  a  healthful  tendency 
in  modern  life.  It  must  be  remembered  that  our  industrial  society 
rests  uponi  English  jurisprudence,  that  English  jurisprudence  ac- 
knowledges the  individual  as  the  center  of  all  industrial  activity, 
that  it  provides  for  him  the  institution  of  private  property,  holds  him 
to  strict  accountability  and  assumes  that  competition  between  pro- 
ducers on  the  one  hand  and  purchasers  on  the  other  hand  is  a 
guaranty  of  justice  and  equity  in  all  individual  conduct.  Do  trusts 
fit  naturally  into  this  theory  of  society?  For  the  preservation  of 
democracy  there  must  be  maintained  a  fair  degree  of  equality  in  the 
social  standing  of  citizens.  Do  trusts  tend  to  s-uch  equality?  For 
the  normal  workings  of  that  industrial  society  which  is  the  product 
of  six  centuries  of  history,  the  door  of  opportunity  must  not  be 
closed.  Do  trusts  tend  to  close  the  door  of  opportunity?  For  the 
realization  of  the  American  idea  of  government  there  must  be  a 
balance  of  power,  and  the  interests  that  lie  outside  the  government; 
on  the  other  hand,  do  trusts  tend  to  destroy  this  balance  of  power  V 
I  would  not  claim,  without  discussion,  that  the  trust  organization  of 
society  destroys  reasonable  equality,  closes  the  door  of  industrial 
opportunity,  or  tends  to  disarrange  that  fine  balance  essential  to  the 


CAUSES  OF  THE  TRUST  MOVEMENT.  119 

successful  workings  of  an  automatic  society;  but  I  do  assert  that 
the  questions  here  presented  are  debatable  questions  and  that  the 
burden  of  proof  lies  with  the  advocates  of  this  new  form  of  business 
organization. 

ORIGIN  AND  CAUSES  OF  TRUSTS. 

If  the  current  tendency  toward  consolidation  in  manufacturing 
industries  does  not  spring  from  the  nature  of  the  industry,  and  if  the 
benefits  accruing  to  the  public  from  these  consolidations  are  at  least 
questionable,  it  is  incumbent  upon  us  next  to  inquire  out  of  what 
conditions  these  modern  industrial  organizations  have  sprung.  1 
shall  venture  but  three  suggestions  in  this  connection.  Doubtless 
many  more  will  be  presented  as  this  convention  proceeds  in  its  de- 
liberations. 

The  inequalities  which  exist  in  established  schedules  of  railway 
rates,  as  also  the  proneness  of  railways  to  depart  from  published 
schedules  in  order  to  secure  the  business  of  large  shippers,  works 
toward  the  consolidation  of  manufacturing  industries  and  commer- 
cial enterprises.  It  is  not  intended  to  say  that  maladministration  pn 
the  part  of  railways  is  of  itself  responsible  for  present  industrial 
tendencies.  It  is,  however,  true  that  in  so  far  as  railways  discrimi- 
nate in  favor  of  large  shippers  they  present  a  motive  to  shippers  to 
become  as  large  as  possible.  This  is  too  familiar  a  fact  to  call  for  dis- 
cussion. The  truth  is,  that  the  business  of  transportation  underlies 
all  other  businesses;  it  determines  the  conditions  upon  which  other 
forms  of  industry  are  carried  on,  and  by  the  manipulation  of  rate 
schedules  tone,  color  and  character  can  be  given  to  industrial  society 
at  large.  While  the  solution  of  the  railway  problem  would  not  neces- 
sarily cause  all  trusts  and  combinations  to  disappear,  its  solution  is 
essential  for  dealing  wisely  with  the  trust  problem..  No  one  can 
deny  that  inequitable  railway  charges  and  discriminations  in  railway 
rates  are  an  important  element  in  the  conditions  that  foster  commer- 
cial combinations. 

In  further  explanation  of  the  current  tendency  toward  business 
combination  on  the  part  of  industries  that  by  their  nature  are  not 
monopolistic,  reference  may  be  made  to  the  fact  that  the  commercial 
jurisdiction  of  modern  business  is  much  broader  than  the  political 
jurisdiction  of  the  governments  whose  protection  they  seek  and  by 
whom  they  should  be  controlled.  The  federal  government  has  no 
authority  over  many  of  the  questions  raised  by  the  study  of  trusts, 
while  the  state  governments  are  confined  in  the  exercise  of  their 
authority  to  their  local  jurisdictions. 

LEGISLATION-FEDERAL  AND   STATE  CONTROL. 

Such  a  condition  must  result  in  confusion  of  laws,  in  uncertainty 
of  procedure  and  in  enabling  the  interstate  enterprises  which  rest 
upon  state  foundations  to  become  a  law  unto  themselves,  so  far  as 
the  conduct  of  their  affairs  is  concerned.  Competition  cannot  work 
equitably  under  such  conditions.  Justice  attends  competition  only 
when  competitors  stand  on  an  equal  footing.  It  is,  therefore,  no 


120  TRUSTS  OR  COMPETITIONf 

occasion  for  surprise  to  one  who  is  familiar  with  the  present  con- 
dition of  state  laws  upon  industrial  affairs  that  small  and  localized 
industries  should  find  themselves  at  a  disadvantage  in  their  struggle 
for  existence  with  the  great  combinations.  A  national  market  has 
taken  the  place  of  the  local  market,  but  we  still  rely  upon  local  law 
for  its  regulation  and  control.  Uncertainty  of  law  and  harmony  of 
procedure  are  as  essential  as  uniform  railway  rates  and  absence  of 
discrimination  to  restore  those  conditions  in  which  competition  can 
affect  its  normal  and  beneficent  results. 

We  are  thus  carried  by  our  analysis  from  the  consideration  of 
economic  relations  to  the  stupendous  question  of  political  organiza- 
tion and  legislative  procedure.  He  who  believes  in  local  government 
will  not  readily  consent  to  the  proposition  that  the  federal  congress 
should  assert  exclusive  authority  over  commercial  and  industrial  con- 
ditions. Nor,  on  the  other  hand,  will  he  who  appreciates  the  signifi- 
cance and  the  beneficent  results  of  a  world's  market  consent  to  the 
suggestion  that  the  business  transactions  of  a  state  concern  should  not 
extend  beyond  the  borders  of  a  state.  Here  is  a  problem  for  states- 
men to  contemplate,  and  it  is  possible  before  arriving  at  its  solution 
that  the  constitutional  relations  between)  the  local  and  the  federal 
government  will  be  subjected  to  modification.  Without  entering  upon 
this  phase  of  the  subject,  may  I  submit  for  consideration  the  follow- 
ing proposition:  The  true  function  of  a  central  government  in  dealing 
with  problems  of  internal  economy  is  to  determine  the  fundamental 
principles  of  legislation,  while  the  true  function  of  local  government 
is  to  express  those  principles  in  the  terms  of  local  conditions  and  to 
administer  the  laws  thus  expressed.  By  this  means  harmony  of 
action,  at  least,  would  be  secured,  and  one  of  the  conditions  out  of 
which  industrial  combinations  spring  will  have  been  set  aside. 

My  third  suggestion  in  explanation  of  the  persistence  of  combina- 
tions in  industries  which  from  their  nature  are  subject  to  competition 
is  found  in  the  unsatisfactory  condition  of  state  laws  of  incorporation. 
This  is  a  question  that  should  be  considered  by  a  lawyer,  but  by  the 
lawyer  who  is  familiar  with  the  industrial  history  of  the  English- 
speaking  people.  Originally  a  corporation  created  by  the  state  was 
regarded  as  an  arm  of  the  state.  Individuals  were  clothed  with  some 
degree  of  public  authority  because  they  undertook  to  perform  what 
were  regarded  as  public  duties.  The  Bast  India  Company,  which 
planted  an  empire,  is  an  illustration  of  such  a  corporation. 


WILLIAMS  COLLEGE. 

PROF.  CHARLES  J.  BULLOCK. 
[Contributed.] 

The  recent  extraordinary  movement  in  the  direction  of  in- 
dustrial consolidation  is  explicable,  in  part,  by  the  unusually 
favorable  conditions  which  the  stock  markets  have  afforded  for 
floating  the  securities  of  almost  any  kind  of  corporate  enterprise. 


PROFESSOR  BULLOCK  OF  WILLIAMS.  121 

Even  a  casual  examination  of  the  financial  papers  suffices  to 
show  that  it  is  recognized  in  all  financial  circles  that  overcapi- 
talization has  been  the  rule;  and  that  the  active  demand  of 
investors  for  corporate  securities  has  given  the  promoters  of 
our  recent  combinations  the  opportunity  to  market  large  quan- 
tities of  stock  that  represent  nothing  but  the  "good-will"  of  the 
enterprises  consolidated.  Not  only  has  the  common  stock  of 
these  companies  often  represented  nothing  but  water,  but  also 
the  bonds  or  preferred  stock  have  been  issued  in  amounts  that 
largely  exceed  in  many  cases  the  cash  selling  price  of  the  plants. 

But,  apart  from  the  inducements  which  the  stock  markets 
have  offered  for  the  formation  of  these  combinations,  there  is 
undeniably  a  strong  tendency  toward  industrial  centralization. 
This  is  due  to  the  desire  to  avoid  certain  losses  and  wastes  of 
competition,  and  to  the  hope  of  securing  a  monopoly  of  the  in- 
dustries in  question.  The  economy  resulting  from  production  on 
a  large  scale  is  admitted  by  all  economists;  but  it  is  a  debatable 
question  whether,  outside  of  such  industries  as  are  natural 
monopolies,  this  economy  continues  to  be  realized  up  to  the 
point  where  monopoly  is  reached.  In  other  words,  it  is  ad- 
mitted that  production  on  a  large  scale  is  an  economical  neces- 
sity, but  it  is  not  admitted  that  a  monopoly  has  great  advantage 
in  the  work  of  production  over  a  large  enterprise  that  is  big 
enough  to  secure  maximum  efficiency  of  plant. 

If  some  combinations  have  maintained  for  some  years  a 
practical  monopoly  in  their  respective  industries,  this  fact  may 
often  be  explained  on  the  ground  that  discriminations  in  railway 
rates  and  accommodations  furnished  shippers  have  given  the 
would-be  monopolist  an  advantage  over  the  independent  pro- 
ducer. In  other  instances  the  control  over  middlemen  and  job- 
bers exercised  by  some  large  combinations  may  be  one  chief 
cause  of  strength.  Other  explanations  of  a  similar  nature  may 
possibly  be  advanced. 

For  my  own  part  I  have  been  unable  to  come  to  a  definite 
conclusion  concerning  the  question  of  the  permanence  of  the 
control  which  many  of  the  combinations  are  now  able  to  exercise 
over  their  respective  industries;  but  I  am  inclined  to  believe  thar, 
while  production  on  a  large  scale  is  going  to  continue,  monopoly  is 
not  likely  to  continue  outside  of  the  field  of  natural  monopolies, 
after  some  method  is  devised  for  doing  away  with  the  unfair 
and  often  illegal  advantages  which  the  largest  combinations  now 
enjoy.  In  some  form  or  other,  competition  will  be  the  con- 
trolling principle,  except  in  those  cases  where  natural  monopolies 
are  certain  to  prevail. 


122  TRUSTS  OR  COMPETITIONT 

INSTITUTE  OF  SOCIAL  ECONOMICS. 

PKOPESSOB  GEORGE  GUNTON. 

Professor  George  Gunton,  president  of  the  Institute  of  Social 
Economics,  New  York,  and  editor  of  Gunton' s  Magazine,  ad- 
dressed the  Chicago  Trust  Conference  on  "Trusts  and  the  Public 
Welfare."  The  speaker  practically  confined  himself  to  the  pre- 
sentation of  abundant  proofs  that  modern  large-scale  production 
by  large  corporations  and  with  large  capital  is  in  the  line  of  eco- 
nomic development  and  is  serviceable  to  society.  Following  are 
extracts: 

It  must  be  remembered,  first  of  all,  that  the  trust,  be  it  good 
or  bad,  is  only  one  among  a  large  number  of  experiments  in  in- 
dustrial organization,  which  the  progress  of  the  last  fifty  years 
has  evolved.  One  of  the  marked  features  of  the  economic  de- 
velopment of  the  century  is  the  radical  change  that  has  taken 
place  in  the  character  of  competing  units.  Under  the  primitive 
hand  labor  method,  the  competing  unit  was  the  individual.  With 
the  development  of  factory  methods,  the  individual,  as  a  com- 
peting unit,  was  superseded  by  partnerships,  because  they  could 
more  economically  employ  the  new  methods.  With  the  growth  of 
invention,  partnerships  were  superseded  by  corporations.  With 
the  growing  completeness  of  machinery  and  magnitude  of  busi- 
ness, corporations  grew  larger  and  larger,  until  the  corporation 
is  now  the  prevailing  form  in  the  most  advanced  countries. 

Nor  is  this  limited  to  the  capitalist  side  of  industry.  It  is 
equally  characteristic  of  the  labor  side.  The  competing  unit  in  the 
labor  market  is  no  longer  the  individual  laborer,  but  the  group, 
the  union.  The  factory  system  has  made  it  impossible  for  in- 
dividual laborers  to  be  competitors,  because  it  is  impossible  for 
them  to  make  individual  contracts.  In  all  matters  pertaining  to 
wages,  hours  of  labor,  conditions  of  work,  whether  by  piece  or 
by  the  day,  it  is  the  group  and  not  the  individual  that  is  con- 
sidered. Each  factory,  and  in  most  instances  each  industry,  pays 
uniform  wages,  works  the  same  hours,  and  has  substantially  the 
same  conditions,  and  when  they  are  altered  for  one  they  are 
altered  for  all.  In  short,  the  progress  during  the  nineteenth  cen- 
tury has  irrevocably  established  the  group  as  the  competing  unit; 
the  union  as  the  unit  on  the  labor  side,  the  corporation  as  the 
unit  on  the  capital  side. 

It  is  not  to  be  assumed,  however,  that  large  corporations  are 
always  wise,  or  good,  or  fair.  They  are  born  of  the  same  spirit 


PROFESSOR  GUNTON  ON  MONOPOLIES.  123 

and  partake  of  the  same  attributes  as  the  small  business  venders. 
Their  main  ambition  is  to  make  profits.  It  is  the  duty  of  the  state, 
therefore,  to  see  to  it  that  the  conditions  shall  be  such  as  to  make 
dishonesty,  unfairness,  oppressive  dealing,  difficult  and  as  im- 
possible as  any  other  offenses  against  the  welfare  of  the  com- 
munity. This  cannot  be  accomplished,  however,  by  the  petty 
nagging  and  corruption-creating  license-granting  proposed  by  Mr. 
Bryan.  The  federal  government  if  it  acts  at  all  should  act  i'i 
exactly  the  other  direction.  It  should  surround  industrial  enter- 
prises with  the  maximum  freedom  and  the  maximum  protection 
to  all.  and  no  uneconomic  privilege  to  any. 

To  this  end  it  might  be  well  for  Congress  to  enact  a  law  em- 
powering the  government  to  grant  national  charters  to  corpora- 
tions, which  should  give  them  the  right  to  do  business  over  the 
entire  territory  of  the  United  States,  against  which  no  state  should 
have  the  right  to  interfere.  This  would  be  economic,  in  that  it 
would  give  the  market  of  the  entire  country  to  every  business  en- 
terprise. National  charters  could  have  the  proper  qualifications 
subjecting  the  corporations  to  a  certain  supervision  and  com- 
pelling annual  reports  to  be  made.  Second,  it  might  also  be 
provided  that  companies  using  a  public  franchise,  like  railroads, 
should  not  be  permitted  to  make  uneconomic  discriminations  in 
their  rates  of  traffic,  that  they  should  be  subject  to  public  ac- 
counting, and  that  all  contracts  with  shippers  should  be  accessible 
to  all  other  shippers.  The  general  influence  of  publicity  and  in- 
spection by  the  national  government,  coupled  with  the  corpora- 
tion's protection  in  its  right  to  do  business  throughout  the  United 
States,  would  tend  to  create  a  wholesome  influence  around  cor- 
porate conduct.  While  affording  corporations  the  full  support  of 
the  national  government  in  their  business  rights,  it  would  free 
them  from  the  petty  uneconomic  nagging  of  partisan  legislation  in 
the  different  states.  It  would  carry  out  the  true  idea  of  protec- 
tion—that the  American  market  should  be  open  to  every  American 
producer  and  that  the  interests  of  the  laborers  and  the  public 
be  safeguarded  by  the  national  government;  at  the  same  time 
leaving  the  essential  features  of  business  to  be  determined  by  the 
free  action  of  economic  forces,  which  are  more  permanent,  more 
sure  and  more  equitable  than  the  wisest  statutory  enactment 
would  ever  be. 

Professor  Guaton  made  scarcely  any  reference  to  the  central 
monopoly  feature  of  trusts,  but,  on  the  other  hand,  said:  "The 
whole  question  which  this  conference  is  called  to  consider  is, 
What  is  the  influence  of  large  corporations  upon  public  welfare?" 


124  TRUSTS  OR  COMPETITION? 

In  answer  to  a  request  for  his  views  on  the  monopoly  element 
in  the  trust  system,  he  has  furnished  the  editor  the  following: 

THE  QUESTION  OF  MONOPOLIES. 

The  idea  that  trusts  are  monopolies  is  doubtless  a  large  ele- 
ment in  the  public  agitation.  It  is  important,  however,  not  to 
be  carried  away  by  mere  terms  and  loose  statements.  It  is  uni- 
versally admitted  that  competition  is  indispensable  to  healthy 
industry.  Monopoly  is  exclusive  control  that  shuts  out  competi- 
tion. Now,  are  there  any  such  monopolies?  I  do  not  know  of  any 
established  industry,  outside  of  the  United  States  postoffice,  which 
is  a  monopoly;  that  is,  has  no  competition.  There  have  been  sev- 
eral efforts  to  secure  a  monopoly,  through  combinations!  and  cor- 
ners, like  the  French  Copper  syndicate,  and  the  Nail  combina- 
tion, both  of  which  were  ignominious  failures.  As  a  matter  of 
fact,  it  cannot  be  said  that  we  have  any  great  corporations  that 
possess  a  monopoly.  The  Standard  Oil,  Carnegie,  Sugar,  West- 
ern Union  Telegraph  and  the  railroad  companies  are  among  the 
largest  of  their  kind,  but  none  of  them  have  a  monopoly  in  their 
line  of  business. 

Again,  there  are  two  kindsi  of  monopolies;  one  created  by 
law  and  special  privileges  and  the  other  created  by  superior 
competitive  power,  i.  e.,  selling  better  goods,  or  cheaper,  than 
anybody  else.  Of  the  special-privilege  kind  of  monopoly  there 
is  none  in  this  country.  A  monopoly  that  is  secured  by  superior 
rivalry  does  not  necessarily  bring  with  it  any  of  the  evils  so 
much  dreaded,  because  if  actual  competition  slackens,  through 
the  superiority  of  one  competitor,  potential  competition  is  ever 
present  in  such  cases.  That  is  to  say,  so  long  as  the  right  and 
opportunity  to  enter  the  field  and  compete  for  the  business  is 
open,  if  the  existing  enterprise  uses  its  power  abnormally  to 
raise  the  price  so  as  to  get  fabulous  profits,  capital,  which  is 
ever  waiting  for  bonanza  opportunities,  will  enter  the  field  and 
compel  it  to  disgorge  part  of  its  profits  by  lowering  the  price 
or  else  to  do  what  is  the  same  thing,  buy  out  the  new  competitor. 
The  latter  is  often  the  more  expensive  way.  Self-interest,  when 
at  all  enlightened,  dictates  the  policy  of  keeping  the  profits  suffi- 
ciently low  not  to  tempt  rival  concerns  to  enter  into  competition;. 

First,  then,  we  have  no  monopolies  in  any  proper  sense  of 
the  term;  second,  even  if  we  had  there  is  no  serious  danger  to 
public  welfare  if  the  monopoly  is  not  the  result  of  legal  privi- 
leges which  close  the  door  to  new  capital  and  new  competitors. 
Of  such  we  have  none  except  in  the  case  of  railroads  and  concerns 
which  have  franchise  privileges^  aind  these  ought  to  be  under 
government  supervision  as  to  charges  and  rates,  compelling'  pub- 


COMMENT  ON  PROFESSOR  QUNTON'S  VIEW.  125 

lie  accounting  and  uniformity  of  charges  to  the  same  class  of 
customers. 

The  present  rise  of  prices  is  no  criterion  by  which  to  judge 
the  monopolistic  effect  of  existing  large  corporations,  either  new 
or  old,  because  prices  have  risen  quite  as  much,  and  in  many 
cases  more,  in  industries  where  the  competitors  are  most  nu- 
merous, as  in  those  where  they  are  the  fewest.  Witness  the  im- 
mense rise  in  the  price  of  live  stock,  raw  cotton,  iron  ore,  pig 
tin,  etc.,  as  compared  with  that  of  petroleum,  sugar,  telegraph 
and  railroad  rates.  The  test  of  monopolistic  influences  on  prices 
can  only  be  found  in  the  tendency  of  well-established  concerns, 
and  the  evidence  everywhere  is  that  in  those  concerns  which 
are  called  the  most  monopolistic,  like  the  sugar  and  oil  trusts  and 
railroads,  the  prices  have  most  steadily  fallen. 

COMMENT. 

One  who  was  disposed  to  criticise  this  view  would  probably 
say  something  like  this: 

Professor  Gunton  first  impliedly  adopts  an  impossible  defini- 
tion of  monopoly  as  the  term  is  used  in  the  trust  debate,  and  then 
with  entire  accuracy  declares  monopoly  thus  defined  to  be  im- 
possible and  non-existent.  He  discusses  an  absolute,  theoretical 
or  complete  monopoly,  while  every  student  of  economics  and 
every  man  of  affairs  fully  understands  that  in  practice  such  a 
monopoly  of  any  industry  is  like  a  perfect  vacuum  in  physics, 
virtually  impossible.  Even  Professor  Gunton's  unfortunate  ex- 
ample of  an  absolute  monopoly,  the  United  States  postal  service, 
furnishes  a  striking  illustration  of  the  fallacy  here  involved.  In 
fact,  the  postal  department  to-day  encounters  at  the  hands  of 
the  banks,  the  telegraph,  the  express  and  railroad  companies 
more  and  keener  competition  than  does  the  Standard  Oil,  the 
Sugar  Trust  or  the  Western  Union.  Take  our  Alaskan  seal  in- 
dustry. This  is  a  perfect  example  of  the  legal  monopoly  backed 
by  the  power  of  the  United  States  government,  yet  foreign  seal- 
ers compete  both  by  land  and  sea.  The  form  of  monopoly  which 
constitutes  the  central  factor  in  our  trust  system  is  perfectly 
well  known  in  the  language  both  of  business  and  of  economic 
science  as  a  virtual  or  practical  monopoly.  The  qualifying  word 
Is  usually  omitted  because  unnecessary,  just  as  vacuum,  unquali- 


126  TRUSTS  OR  COMPETITION f 

fied,  always  means  an  approximate  or  virtual  vacuum.  Professor 
Gunton  cites  the  Sugar  Trust  as  being  not  a  monopoly,  yet  when 
President  Havemeyer,  in  testifying  before  the  Lexow  Commit- 
tee, was  asked  whether  his  company  controlled  the  price  of  refined 
sugar  in  this  country,  he  replied,  "We  certainly  do,  up  to  the 
importing  point."  This  constitutes  a  virtual  monopoly— the  only 
sort  the  people,  the  economists,  the  legislatures  and  the  courts 
are  talking  about,  and  the  only  sort  the  trusts  aim  to  get  and 
hold.  It  will  occur  to  Professor  Gunton  on  reflection  that  if  a 
trust  could  escape  the  merited  or  unmerited  odium  and  the  possi- 
ble legal  liabilities  attaching  to  monopoly  by  simply  pointing  to 
some  competition,  however  slight,  in  its  field,  it  would  infallibly 
see  to  it  that  such  nominal  competition  was  not  lacking.  Finally, 
the  professor's  virtual  insistence  that,  even  in  the  absence  of 
present  actual  competition,  monopoly  is  prevented  by  the  possi- 
bility of  future  competition,  is,  of  course,  equivalent  to  saying 
that  everywhere  and  always  even  a  virtual  capitalistic  monopoly 
is  impossible.  This  would  seem  to  exhaust  the  possibilities  of 
debate. 


OBERLIN  COLLEGE. 

PROFESSOR  T.  N.  CARVER. 
[Contributed.] 

The  first  thing  that  ought  to  be  said  with  regard  to  the 
"trust"  system  is  that  it  is  simply  a  new  name  for  an  old  thing. 
The  essential  principle  involved  in  the  trust  system  is  older 
than  the  modern  factory  system  itself,  and  may  be  said  to  be  a 
feature  of  every  sound  industrial  system.  This  principle  is  the 
adjustment  of  supply  to  demand  by  rational  foresight  raither 
than  by  irrational,  uncontrolled  competition. 

Before  the  age  of  steam  transportation  and  steam-driven 
machinery,  markets  were  small.  A  few  workmen  in  each  neigh- 
borhood produced  the  goods  for  the  supply  of  that  neighborhood. 
They  ha,d  no  wider  market  and  the  neighborhood  depended  upon 
its  own  workmen  for  its  supply  of  goods.  Each  neighborhood 
constituted  a  market.  Under  these  conditions,  it  was  compara- 
tively easy  for  the  producers  of  any  article  to  know  the  condi- 


PROFESSOR  CARVER  OF  OBERLIN,  127 

tions  of  the  market,  to  gauge  the  probable  demand,  and  to  cal- 
culate on  the  probable  supply.  But  it  would  be  a  mistake  to  sup- 
pose that  the  workmen  left  the  supply  to  take  care  of  itself, 
regulated  only  by  competition.  The  universal  testimony  is  that 
always  and  everywhere,  there  was  a  mutual  understanding 
among  workmen  and  producers  of '  manufactured  products,  not 
to  produce  in  excess,  nor  to  sell  below  a  fair  price. 

The  advent  of  steam  destroyed  all  that.  Steam  transporta- 
tion enlarged  markets,  so  that  one  neighborhood  could  be  sup- 
plied with  products  made  half  around  the  world.  Steam-driven 
machinery  enlarged  production,  so  that  most  factories  were  com- 
pelled to  find  sale  for  their  goods  in  distant  neighborhoods.  It 
was  no  longer  so  easy  for  the  producer  to  know  the  exact  condi- 
tions of  the  market,  and  it  .seemed  impossible  to  adjust  the  demand 
to  the  supply.  As  a  result,  a  period  of  reckless,  unrestrained 
competition  set  in.  Each  producer  began  invading  the  territory 
of  other  producers,  and  the  salesmen  of  competing  establishments 
trampled  on  each  other's  heels  in  their  efforts  to  outsell  one 
another.  This  was  an  unnatural  condition  and  could  not  last. 
Sooner  or  later  there  was  certain  to  be  a  return  to  the  older 
principle  of  rational  adjustment  of  supply  to  demand.  But  under 
the  new  conditions,  that  principle  had  to  be  worked  out  on  a 
different  plan  from  the  old  one.  Instead  of  a  large  number  of 
neighborhood  markets,  we  now  have  a  world  market  for  most 
of  our  manufactured  products.  So,  instead  of  a  neighborhood 
understanding  among  a  few  producers,  we  now  have  a  world, 
or  at  least  a  national,  organization  of  producers  to  control  the 
supply.  We  call  such  organizations  trusts. 

Since  such  organizations  are  normal,  and  are  following  out  an 
old  principle,  older  than  the  modern  industrial  system,  it  is 
useless  to  contend  against  them.  They  are  here  to  stay.  If  we 
have  any  quarrel  at  all,  it  must  be  with  the  modern  transporta- 
tion system,  and  the  modern  factory  system  which  brought  the 
trust  system  in  their  train. 

This  is  not  saying  that  trusts  need  no  control.  It  is  too  soon 
yet  for  anyone  to  say  confidently  just  how  they  are  to  be  con- 
trolled, but  one  or  two  general  propositions  may  be  stated  as  a 
guide.  In  the  first  place,  trusts  contain  possibilities  in  the  way 
of  economy  of  production  and  are  therefore  to  be  welcomed  as 
readily  as  an  improvement  in  machinery  or  any  other  improve- 
ment which  increases  the  productive  power  of  the  country.  In 
the  second  place,  trusts,  by  their  very  size  and  influence,  contain 
possibilities  of  evil  in  the  way  of  discriminations  and  unfair 
devices  against  independent  producers,  besides  vast  power  of 
political  corruption. 

If  these  things  are  true,  manifestly  our  duty  is  not  to  destroy 


128  TRUSTS  OR  COMPETITION? 

trusts,  even  if  we  could,  for  we  would  thus  deprive  ourselves 
of  their  economic  advantages;  nor  to  let  them  go  uncontrolled,  for 
we  should  then  retain  all  the  evil  possibilities;  but  to  subject 
them  to  such  control  as  will  restrain  and  destroy  their  powers 
for  evil,  at  the  same  time  retaining  their  economic  advantages 
in  the  way  of  economy  of  production.  I  do  not  know  how  this 
will  be  done,  any  more  than  I  know  just  how  an  automobile  ought 
to  be  constructed  so  as  to  get  the  most  practical  service  out  of  it; 
but  I  am  not  yet  willing  that  the  world  shall  give  up  either 
problem  in  despair,  for  both  are  within  the  power  of  human 
ingenuity  to  solve. 


DARTMOUTH  COLLEGE. 

PROFESSOR  FRANK  HAIGH  Dixos. 
[Contributed  ] 

The  present  "trust"  problem  in  the  United  States  concerns 
itself  not  with  some  peculiar  form  of  organization,  but  with 
all  monopolies  or  partial  monopolies  that  temporarily  at  least 
are  superior  to  the  force  of  competition  in  the  fixing  of  prices. 
They  are  but  an  expression  of  the  force  of  self  interest  among 
business  men,  the  culmination  of  a  long  and  bitter  struggle 
involving  cut-throat  competition,  overproduction,  and  resultant 
depression,  a  depression  intensified  by  the  rapidly  increasing 
use  of  large  amSunts  of  fixed  capital. 

These  organizations  will  for  many  years  to  come,  doubtless, 
take  a  prominent  place  in  our  industrial  life,  and  their  methods 
deserve  careful  study.  Unquestioned  benefits  have  resulted  from 
co-operation  of  large  industries  under  skillful  management. 
Economies  have  been  introduced  into  all  stages  of  production 
and  efficiency  materially  increased.  Stability  has  been  promoted 
in  the  business  world),  and  the  dangers  of  industrial  disturb- 
ances due  to  unregulated  competition  minimized.  That  laborers 
have  been  thrown  out  of  employment  in  many  instances  cannot 
be  regarded  as  a  final  argument  against  the  trust  efficiently 
managed,  for  any  process  which  lowers  the  ultimate  cost  of 
production  must  work  to  the  benefit  of  all. 

Any  interference  with  this  tendency  toward  consolidation 
should  be  regulative  rather  than  destructive.  The  fixing  of  prices 
can  be  safely  left  in  large  part  to  the  self-interest  of  the  monop- 
olies. Prices  cannot  be  made  so  high  as  to  force  consumers 
to  the  use  of  substitutes,  nor  can  they  reach  the  point  where 
competitors  will  arise  attracted  by  the  unusual  profit.  The  ease 
with  which  large  manufacturing  plants  can  be  diverted!  from 


PROFESSOR  JOHN  GRAHAM  BROOKS.  129 

one  kind  of  production  to  an  allied  line  makes  competition  be- 
tween the  large  industries  possible  and  acts  as  a  deterrent  of 
the  rise  of  price.  For  such  regulation  as  seems  at  present  neces- 
sary, we  must  look  to  the  states  rather  than  to  Congress,  for  the 
power  of  the  latter  is  limited  to  such  products  as  become  the 
subjects  of  interstate  shipment.  The  most  promising  field  for 
state  interference  is  to  be  found  in  corporation  accounting.  If 
complete  publicity  of  accounts  were  insisted  upon  in  the  case 
of  all  industrial  corporations  receiving  charters  from  the  states, 
many  of  the  evils  of  privately  controlled  organizations  would 
disappear  of  necessity  and  much  groundless  suspicion  on  the 
part  of  the  misinformed  be  removed.  Further  regulation  can 
be  secured  through  the  creation  of  state  commissions  clothed 
with  powers  sufficient  to  safeguard  the  people's  interests.  To 
them  could  be  Intrusted,  if  necessary,  the  determination  of 
maximum  rates  and  maximum  dividends.  Whether  more  vigor- 
ous interference  that  would  lead  to  the  destruction  of  the 
trusts  or  to  their  virtual  absorption  by  the  states  will  be  neces- 
sary depends  upon  the  policy  adopted  by  the  monopolies  them- 
selves. Such  radical  action  cannot,  however,  be  defended  in 
the  light  of  present  conditions. 


UNIVERSITY  OF  CHICAGO. 

PROFESSOR  JOHN  GRAHAM  BROOKS  addressing  the  Liberal  Club  of  Buffalo,  Nov. 

16,  1899. 

The  trust  proper  was  in  a  very  special  sense  of  American,  origin. 
What  we  are  now  dealing  with  is  not  local  in  its  beginnings,  put 
has  been  slowly  appearing  for  half  a  century  wherever  competition 
had  brought  about  specific  dangerous  results.  It  is  indeed  a  great 
aid  to  clearness  if  we  see  at  once  that  all  which  is  essential  to  the 
new  combinations  is  in  no  sense  new.  Proudhon,  in  his  "Economi- 
cal Contradictions,"  written  before  1846,  discussed  with  extraordinary 
acuteness  the  phenomenon  which  now  frightens  us.  The  ablest  de- 
fenders of  trusts  are  now  eager  to  distinguish  between  uses  and 
abuses.  Proudhon,  in  his  attack  upon  competition,  ridiculed  the 
economists,  Blanqui  and  Rossi,  for  their  attempt  to  save  an  un- 
restrained competition  by  attempting  to  eliminate  its  abuses.  The 
tendencies  to  check  competition  by  organization  in  France  about  1840 
created  much  dismay.  It  had  already  grown  clear  that  a  complete 
let-alone  policy  was  not  workable  among  the  Paris  cab  drivers,  and 
the  French  publicist,  M.  Troplpng,  insisted  that  the 'necessity  of  con- 
trolling competition  in  this  instance  was  likely  to  be  almost  a 
solitary  exception.  Yet,  already  an  unfettered  competition  in  the 
coal  industry  had,  in  certain  parts  of  France,  been  found  impossible 

9 


130  TRUSTS  OR  COMPETITION? 

and  organization  had  already  begun.  From  that  time  to  the  present, 
anything  like  complete  competition  has  been  more  and  more  restricted 
in  hundreds  of  commercial  centers  in  Europe.  It  would  probably 
be  safe  to  say  that  at  the  present  moment  in  Europe  there  are  1,000 
organization*  formed  for  the  primary  object  of  correcting  the  abuses 
of  competition.  They  are  formed  by  the  score  in  Germany.  Austria 
and  Hungary  would  not  have  anti-trust  legislation  if  they  were 
without  the  thing.  What  is  extremely  hopeful  from  this  European 
experience  is  that  legislation  which  forces  a  very  strict  responsibility 
upon  directors  and  managers  has  deprived  these  aggregations  of 
capital  of  those  evils  which  alarm  so  many  of  our  citizens. 

The  chief  perplexity  which  the  student  of  the  trust  must  feel 
is  in  the  undeveloped  character  of  the  movement  which  the  new 
organization  represents.  The  most  searching  tests  of  utility  we  can- 
not apply  for  the  reason  that  no  test  is  yet  at  hand.  Do  the  new 
organizations  raise  prices  or  lower  them?  Mr.  Bryan  affirms  that 
even  if  they  lower  the  price,  he  would  still  oppose  them  as  an 
evil.  This  view  must,  I  think,  be  exceptional,  but  it  is  surely  very 
vital  to  know  the  general  bearing  of  these  new  forces  upon  prices. 
If  the  tendency  be  to  lower  them,  a  large  part  of  the  objections 
raised  would  disappear.  Yet  so  obvious  a  requisite  to  trustworthy 
opinion  is  nowhere  to  be  found.  Violent  impressions  are  everywhere 
at  hand,  but  they  are  valueless  for  careful  discussion.  Now  this 
discussion,  if  it  is  to  help  us,  has  to  assume  one  momentous  fact, 
viz.,  the  pitiful  lack  of  anything  like  adequate  organization  over 
large  areas  of  industrial  life.  Several  great  primary  industries  are 
in  a  state  so  chaotic  as  to  affront  our  intelligence.  The  truth  is, 
that  the  extreme  clumsiness  of  organization,  if  the  whole  group  is 
considered,  has  thus  far  had  no  searching  and  adequate  statement. 
One  gets  a  hint  of  it  when  one  sees  at  a  single  hotel  in  a  small  city 
five  drummers  competing  against  each  other  in  selling  the  same  prod- 
uct. I  have  heard  one  of  the  most  successful  business  men  in  the 
East  say:  "If  people  generally  knew  how  stupidly  and  wastefully 
much  of  the  large  business  is  carried  on,  we  should  become  objects 
of  ridicule." 

I  submit,  that  to  the  extent  these  charges  are  true,  the  time  is  at 
hand  for  some  kind  of  wide,  thorough  and  effective  reorganization  of 
business;  that  is,  for  that  portion  of  business  into  which  a  reckless 
competition  has  brought  so  much  confusion.  Will  anyone  who  sees 
these  facts  clearly  doubt  that  the  immense  pressure  of  this  necessity 
to  check  an  unregulated  fight  is  the  real  origin  of  the  so-called  trust? 
Many  will,  of  course,  fight  it  as  they  fought  the  partnership,  as  they 
fought  the  corporation,  as  they  fought  new  machinery;  and  they 
will  fight  it  with  precisely  the  same  results.  The  law  can  of  course, 
bother  them;  it  can  make  friction  and  delay;  it  can,  perhaps,  drive 
them  from  one  place  to  another,  because  the  needs  of  a  world  market 
are  beneath  them  and  these  tidal  forces  are  far  stronger  than  any 
regulation  in  the  statute  book.  If  any  political  party  is  green  enough 
to  propose  outright  to  smash  them,  it  will  have  a  great  deal  more 
leisure  to  regret  it  than  it  will  know  what  to  do  with.  The  real 
problem,  immediate  and  imperious,  is  how  to  regulate  and  guide 
the  new  force  that  stands  merely  for  the  latest  stages  of  industrial 
growth.  But  the  abuses,  what  of  them?  That  abuses  run  riot  in  this 


SUOGESTED  REMEDIES  FOR  ABUSES.  131 

movement  and  are  full  of  danger  no  one  questions.  The  one  practical 
test  before  us  is  to  save,  if  we  may,  the  uses  which  these  combina- 
tions bring,  and  subdue,  if  we  can,  their  abuses.  Are  the  trusts 
dangerous?  Yea,  if  the  abuses  are  too  strong  for  us.  If  they  can  be 
brought  under  control,  the  trust  will  bring  to  us  immense  advan- 
tages. When  competition  in  any  industry  has  passed  the  danger 
line,  the  small  concern  or  corporation  is  helpless  to  adapt  production 
and  distribution  to  market  conditions.  This  has  most  fundamental 
importance  for  our  theme.  Fixed  capital  in  the  form  of  machinery 
has  now  so  far  developed  that  in  many  businesses1  seven  months,  at 
full  speed,  will  fully  stock  the  year's  market.  When  the  first  flush 
of  good  business  appears  each  concern  drives  at  full  pressure  in 
order  to  get  the  utmost  trade  possible.  The  race  becomes  fierce  and 
reckless  among  competing  concerns  until  the  market  is  overstocked 
and  the  old  tragedy  begins.  Wages  must  be  cut  and  men  dropped 
and  every  wretched  evil  of  long  out-of-work  periods  is  upon  us.  The 
small  concern  is,  I  say,  helpless  before  this  great  danger.  Combina- 
tion on  an  adequate  scale  alone  can  meet  it.  It  can  steady  prices; 
it  can  steady  the  whole  market  both  for  capital  and  for  labor.  This 
conscious  and  calculated  control  is  the  next  momentous  step  toward 
a  rational  industrial  life. 

But  the  abuses  are  there.  I  will  not  deny  their  gravity,  but  I 
confidently  believe  that  three  steps  may  lead  to  the  removal  of 
whatever  is  most  threatening  in  these  evils.  First,  as  complete  a 

§ublicity  as  that  to  which  the  national  banks  must  now  submit, 
econd,  the  removal  of  every  special  tariff  privilege.  Third,  the  end- 
ing of  special  railway  favors.  The  tariff  is  not  the  primary  cause 
of  trusts,  but  no  disinterested  man  can  deny  that  the  tariff  may  lend 
dangerously  unfair  privileges.  It  is  a  purely  artificial  advantage  to 
which  no  business  has  a  shadow  of  right.  As  the  grave  evil  of 
railway  discriminations  are  part  and  parcel  of  that  habitual  secrecy 
which  is  the  most  deadly  evil  in  the  trust,  I  shall  lay  chief  emphasis 
upon  publicity  as  the  most  important  of  all  remedies.  Even  the 
publicity  which  comes  from,  wide  and  animated  discussion  is  al- 
ready producing  quite  tremendous*  results.  It  is  at  the  present  mo- 
ment incomparably  harder  to  float  any  sort  of  scheme  because  the 
underwriters  have  learned  their  lesson.  The  bankers  will  no  longer 
lend  unless  the  basis  of  the  new  organization  can  be  sworn  to  be 
secure.  Add  to  this,  at  the  earliest  possible  date,  the  same  sort  of 
legal  sanction  for  publicity  that  is  now  secured  under  the  English 
law,  and  dangers  like  that  of  overcapitalization  will  be  reduced  to  a 
minimum. 

We  must  assume  in  all  clear  discussion  that  the  larger  part  of 
these  ventures  will  speedily  enough  come  to  naught.  The  specu- 
lative element  is  so  great  that  they  will  not  stand  the  tests  of  the 
least  severe  experience.  Several  trusts  have  already  failed  and  been 
reorganized  two  and  three  times,  repeating  again  our  railway  history. 
As  the  present  boom  passes  away,  the  real  test  will  appear  of  safe 
and  cautious  reorganization.  We  can  then  first  judge  the  real 
strength  of  this  movement.  The  immediate  hope  is  that  no  movement 
ever  held  such  promise  of  wide  and  thorough  popular  agitation.  Gen- 
eral economic  training  always  tells  if  it  turns  upon  concrete  events 
that  have  magnitude  enough  to  stir  the  feelings  of  the  imagination. 


132  TRUSTS  OR  COMPETITION* 

This  the  trust  movement  does  on  a  great  scale.  There  is  no  blinking 
at  the  fact,  competition  has  at  last  crowded  us  to  the  very  edge  of  the 
most  formidable  industrial  issues  we  have  ever  faced.  Is  the  state 
eventually  to  take  these  monster  combinations  or  are  we  to  con- 
tinue them  in  private  hands?  If  -the  chief  abuses  cannot  be  elimi- 
nated from  private  control;  if  politics  is  still  exploited  for  personal 
gain;  if  city  councils  and  state  legislatures  continue  to  be  bought 
and  sold  as  the  interests  of  the  trust  may  dictate,  then  state  control 
in  its  most  dangerous  form  will  be  thrust  upon  the  American  people 
all  too  soon. 


BUREAU  OF  ECONOMIC  RESEARCH. 

PROFESSOR  EDWARD  W.  BEMIS. 

In  many  lines  the  tendency  is  for  competition  to  become 
so  keen  as  to  leave  no  margin  for  interest  on  the  necessary 
capital.  But  for  their  abuses  the  trusts  might  be  looked  upon 
with  favor;  but  these  abuses  are  serious:  (1)  They  usually  raise 
prices  or  prevent  as  rapid  a  fall  as  ordinary  competitive  con- 
ditions would  secure.  (2)  The  charge  is  well  proven  against 
them  of  over-capitalization  and  consequent  deception  of  in- 
vestors and  the  public  as  to  the  amount  of  their  exorbitant 
charges  and  as  to  their  prospects  for  a  continuance  of  high 
profits.  (3)  Much  might  be  written  of  how  the  trust  often  clubs 
competitors  until  it  drives  them  from  the  field.  An  ordinary 
competitive  business  has  similar  tendencies,  it  may  be,  but  it 
is  the  trust  which  boldly  approaches  a  would-be  rival  and  de- 
clares that  it  will  sell  goods  below  cost  until  it  ruins  him  unless 
he  will  join  the  great  combine.  (4)  Most  ominous  of  all  is  the 
danger  in  the  trust  to  political  purity  and  personal  liberty. 
Whether  we  like  it  or  not  we  are  destined  to  see  vigorous  efforts 
of  our  law-making  bodies  to  regulate  trusts  as  they  have  already 
tried  to  regulate  city  monopolies  of  light,  heat  and  transporta- 
tion. The  latter  effort  has  thus  far  had  its  most  visible  result, 
in  many  cities  in  raising  the  price  of  the  alderman  and  the  leg- 
islator. It  is  to  be  feared  that  this  and  some  malodorous  events 
in  the  United  States  Senate  are  but  a  forecast  of  what  awaits 
us  in  any  really  serious  attempt  to  control  the  trust.  The  sup- 
port of  the  trust  is  so  necessary  to  the  bar  and  the  press,  its 
donations  so  eagerly  desired  by  the  university,  the  library,  and 
the  hospital,  that  freedom  of  speech  is  already  endangered. 


PROFESSOR   EDWARD    W.    BEMIS.  133 

REMEDIES. 
And  what  is  to  be  done  about  it? 

I.  The  trust  may  be  left  alone,  on  the  theory  that  it  will 
soon  go  to  pieces,  or  that  the  abuses  will  correct  themselves. 
This  seems  hardly  warranted  by  history  thus  far. 

II.  To  "smash  the  trust,"  even  if  practicable,  which  may  be 
doubted,  would  deprive  society  of  mighty  possibilities  for  good. 
The  evils   of   industrial   evolution   are   never   solved   by    going 
backward. 

III.  Various  methods  of  control  of  the  trust  may  be  adopted. 
Professor  Jenks,  for  example,  urges  that  stock  exchanges  should 
not  be  allowed  to  list  any  of  the  securities  of  the  capitalistic 
monopolies  without  publishing  most  complete  and  sworn  returns 
of  the  cost  of  construction  and  of  the  production  of  goods,  capi- 
talization, etc.    This  suggestion  is  admirable  so  far  as  it  goes. 

IV.  Observing  that  England,  under  free  trade,  has  witnessed 
a  less  rapid  development  of  trusts  than  have  we,  and  noticing 
further  how  the  tariff  has  been  perverted  in  many  instances  in 
America  and  Germany  so  as  to  protect  combinations  in  exorbi- 
tant charges  at  home  while  they  ship  goods  at  reasonable  prices 
elsewhere,  we  may  demand,  with  Senator  Pettigrew,  the  aboli- 
tion of  the  tariff  on  all  specific  articles  which  Congress  shall 
decide  to  be  controlled  by  trusts.    Although  this  remedy  would 
not  reach  many  trusts,  like  oil  or  anthracite  coal,  it  would  be 
very  effective  in  many  cases.    Mr.   Havemeyer's  recent  attack 
upon  the  tariff  as  the  friend  of  trusts  will  be  recalled. 

V.  Railroad  discriminations,  which  are  already  contrary  to 
law,  are  everywhere  recognized  as  a  powerful  and  unjust  factor 
in  the  development  of  monoplies  of  large  capital.    The  Inter- 
state Commerce  Commission,  in  its  last  report,  declares:  "There 
is  probably  no  one  thing  to-day  which  does  so  much  to  force 
out  the  small  operator  and  to  build  up  those  trusts  and  monopo- 
lies against  which  law  and  public  opinion  alike  beat  in  vain  as 
discrimination   in   freight   rates."    This   railroad   problem   is   so 
serious  that  it  will  soon  attract  an  attention  that  has  never 
hitherto  been  given  to  it.    Unless  all  signs  fail,  the  time  is  coin- 
ing when  public  regulation  of  railroads  will  give  way  to  public 
ownership  and  operation,  as  has  been  the  case  recently  in  Switz- 
erland.   The    railroads    regulate    their    regulators.    They  insidi- 
ously weaken  or  control  commissions.    The  independent  shipper, 
the  average  business  man,  is  likely  ere  long  to  recognize  that 
the  door  to  the  trust  problem  lies  in  a  solution  of  the  railroad. 


134  TRUSTS  OR  COMPETITION? 

STATE  SOCIALISM. 

VI.  There  is  an  increased  number,  though  still  a  minority, 
of  very  intelligent  people,  who  believe  that  the  only  way  ulti- 
mately of  treating  the  trust  adequately  is  for  all  to  join  it, 
by  public  ownership  and  operation  of  oil  refineries,  match  fac- 
tories, anthracite  coal  fields^  distributing  depots,  etc.,  etc.,  just 
as  in  a  somewhat  indirect  manner  the  people  own  many  sugar 
refineries  in  the  great  province  of  Queensland,  Australia.    Prof. 
Bemis  adds  that  while  he  finds  himself  in  growing  sympathy 
with  such  a  solution,  it  seems  still  only  a  remote  possibility. 
The    people    must  first  become  habituated  to  public  operation 
on  a  civil  service  reform  basis,  of  city  monoplies,  the  railroad, 
telegraph  and  express  business,   before  they  can  ever  widely 
undertake  forms  of  business  now  absorbed  by  the  trust. 

VII.  There  is  no  quick  and  royal  road  to  the  settlement  of 
the  trust  question.    Even  Henry  D.  Lloyd,  whose  book  on  this 
subject  is  known  the  country  over,   when  asked  by  a  recent 
Congressional  committee  for  a  bill  dealing  with  the  trust  prob- 
lem, replied  that  he  had  no  legislation  as  yet  to  propose.    The 
trust  problem,  like  the  slavery  question,  will  take  a  generation 
or  more  to  settle,  and  like  the  slavery  question  will  entail  end- 
less trouble  unless  approached  intelligently  and  with  deep,  con- 
scientious devotion  to  the  public  weal. 


UNIVERSITY  OF  WISCONSIN. 

PROPESSOR  RICHARD  T.  ELY. 
[Contributed.] 

Through  the  courtesy  of  Prof.  Richard  T.  Ely,  the  well- 
known  authority  on  economic  questions,  relating  especially  to 
monopolies,  state  and  municipal  /ownership,  and  allied  topics, 
Mr.  George  Ray  Wicker  of  the  University  of  Wisconsin  furnishes 
for  this  work  the  following  characterization  of  Prof.  Ely's  forth- 
coming volume,  entitled  "Monopolies  and  Trusts": 

The  whole  discussion  is  prebably  the  most  complefe  and 
searching  to  be  found.  The  first  chapter  contains  an  exhaustive 
critical  analysis  of  the  concept  of  monopoly,  tracing  the  idea  in 
the  theory  of  economics  from  Senior  to  the  writers  of  the  present 
day,  and  bringing  order  out  of  the  chaos  of  thought  that  sur- 
rounds the  word  in  current  economic,  legal  and  popular  discus- 
sions. Dr.  Ely  believes  that  the  characteristic  feature  of  monop- 


PROFESSOR  RICHARD   T.   EL7.  135 

oly  is  the  absence  of  competition,  and  the  consequent  ability  to 
control  price.  He  expressly  denies  that  scarcity  creates  monop- 
oly, reminding  the  reader  that  if  monopoly  could  be  th'us  pro- 
duced all  economic  goods  would  be  monopolized,  since  their 
value  is  due  to  scarcity.  Land,  in  the  view  of  the  author,  is 
not  a  monopoly,  nor  are  the  common  surplus  gains,  as  claimed 
by  some  writers,  to  be  regarded  as  monopoly  gains.  The  author's 
very  complete  analysis  of  the  idea  of  monopoly  lends  especial 
value  to  his  definition.  "Monopoly,"  in  the  language  of  the 
book,  "means  that  substantial  unity  of  action  on  the  part  of 
one  or  more  persons  engaged  in  some  line  of  business,  which 
gives  exclusive  control  more  particularly,  although  not  solely, 
with  respect  to  price." 

The  second  chapter  treats  of  the  classification  and  causes  of 
monopolies.  The  most  important  classification,  for  scientific  pur- 
poses, is  that  based  upon  the  source  of  power  or  the  cause.  The 
author,  from  a  commendable  desire  to  avoid  even  the  appear- 
ance of  argument  by  epithet,  has  abandoned  the  term  "artificial," 
formerly  used  to  name  one  of  these  classes,  substituting  therefor 
the  word  "social."  The  other  main  class  is  that  of  "natural" 
monopolies.  These  latter,  as  is  known  to  readers  of  his  former 
works,  are  defined  as  resting  back  upon  natural  arrangements, 
as  distinguished  from  social  arrangements;  the  word  natural 
being  given  a  well-accepted  connotation  to  signify  that  they 
have  an  origin  apart  from  man's  will  and  not  infrequently  in 
opposition  to  it.  Social  monopolies,  on  the  other  hand,  arise 
from  social  arrangements,  and  express  the  will  of  society  as  a 
whole,  through  government,  or  of  a  section  of  society  strong 
enough  to  impose  its  will  upon  society.  The  complete  classifica- 
tion follows: 

A.  Social. 

I.  General  welfare  monopolies. 

1.  Patents. 

2.  Copyrights. 

3.  Public  consumption  monopolies. 

4.  Trademarks. 

5.  Fiscal  monopolies. 

II.  Special  privilege  monopolies. 

1.  Based  on  public  favoritism. 

2.  Based  on  private  favoritism. 

B.  Natural. 

I.    Those  arising  from  a  limited  supply  of  raw  material. 
II.    Those  arising  from  properties  inherent  in  the  business. 

III.  Those  arising  from  secrecy, 


136  TRUSTS  OR  COMPETITION? 

Several  other  classifications  are  given  by  the  author  with 
the  purpose  of  further  clearing  the  field  and  arriving  at  a  funda- 
mental understanding  of  the  phenomena  under  discussion. 

The  author,  in  his  third  chapter,  treats  of  the  "Law  of  Monop- 
oly Price,"  which  he  states  as  follows:  "Other  things  being 
equal,  the  higher  the  general  well-being,  and  the  more  readily 
wealth  is  expended,  the  higher  will  be  the  monopoly  price." 
Considerable  space  is  devoted  to  showing  that,  whereas  the 
tendency  of  competition,  in  proportion  to  its  completeness,  is 
to  produce  uniformity  of  price  from  time  to  time,  from  place 
to  place,  from  class  to  class,  and  from  individual  to  individual, 
the  tendency  of  monopoly  is  precisely  the  reverse,  diversity  in 
the  absence  of  external  pressure  extending  to  the  prices  asked 
by  monopolists  from  different  social  classes.  This  treatment  Is 
something  new,  I  believe,  in  economic  literature.  Other  points 
interestingly  treated  in  the  same  chapter  are  the  fixing  of  the 
"revenue  point,"  the  effect  of  various  methods  of  taxation  upon 
monopolies,  the  effect  of  purchasers'  monopolies  upon  supply, 
the  influence  of  surrogates  or  substitutes,  and  also  of  fashion  or 
fad  upon  monopoly  prices,  and  the  bookkeeping  of  monopoly 
gains. 

Chapter  IV,  treating  of  "The  Limits  of  Monopoly  and  the 
Permanency  of  Competition,"  is  particularly  interesting  for  Its 
clear  distinction  between  the  fields  of  competition  and  of  monop- 
oly in  modern  industry.  It  is  worthy  of  special  remark  that  the 
author,  independently  of  the  French  writer,  M.  de  Rousiers.  has 
come  to  a  similar  conclusion— that  very  many  so-called  monop- 
olies are  really  not  inherently  so  at  all,  but  are  only  adjunct 
monopolies,  drawing  monopoly  gains-  from  their  collusion  with 
natural  monopolies.  The  writer,  though  disclaiming  any  ambi- 
tion or  power  to  prophesy,  asserts  distinctly  his  opinion  that 
there  does  not  now  exist  in  the  industrial  field  anything  wl-ich 
would  compel  the  socialistic  conclusion  that  all  competition  is 
self-destroying.  In  other  words,  he  believes,  in  the  possibility 
of  a  permanent  dualism  of  competition  and  co-operation  in  the 
industrial  world. 

Chapter  V  treats  of  the  "Concentration  of  Production  and 
Trusts."  Under  this  caption  the  author  deals  with  the  phe- 
nomena of  large-scale  capitalistic  production,  and  the  vast  in- 
dustrial combinations  which  have  been  so  noticeable,  particiilarly 
in  America,  within  the  last  twelve  or  fifteen  years.  Here,  again, 
the  author  asserts  that  there  is  a  field  in  which  competition  is 
an  inherent  and  natural  characteristic,  though  he  admits  that 
this  field  is  smaller  than  extreme  individualists  have  been  vvont 
to  assume,  He  denies  the  existence  or  the  possibility  of  mon.op- 


A   THREE-FOLD   PROBLEM.  137 

oly  arising  solely  from  aggregation  or  capital  or  from  such 
aggregation  aided  by  superior  business  acumen  in  management, 
and  claims  that  businesses  of  this  sort,  even  when  they  present 
many  of  the  features  of  monopoly,  are  really  but  parasitic 
growths,  whose  extra  competitive  gains  must  disappear  with 
their  removal  from  the  support  of  the  true  monopoly  to  which 
they  are  attached.  At  any  rate,  they  will  always  be  explicable 
upon  some  other  basis  than  that  the  competitive  field  tends  to 
extinction.  After  a  careful  study  of  characteristic  cases  of  con- 
centration of  business,  the  author  shows  that  there  are  certain 
large  fields  of  industry,  notably  agriculture,  in  which  concen- 
tration has  not  marked  the  past,  and  in  which  there  is  no  evi- 
dence that  such  concentration  will  be  more  marked  in  the 
future.  And  yet,  the  author  believes  that  the  tendency  has  been 
very  general  toward  a  raising  of  both  the  minimum  and  the 
maximum  points  of  efficiency  of  the  business  unit. 

Chapter  V  paves  the  way  for  the  discussion  of  the  evils  of 
monopoly  and  of  the  remedies  for  them  as  contained  in  the 
last  chapter.  The  author  finds  that  there  are  really  before  the 
American  people  to-day  three  problems,  that  of  monopoly,  that 
of  large-scale  production,  and  that  of  centralization  of  wealth. 
After  a  discussion  of  the  evils  resulting  from  monopoly,  and  of 
certain  suggested  plans  for  their  treatment,  which  he  is  unable 
to  approve,  he  concludes  with  positive  plans,  which  in  his  judg- 
ment intelligent  social  activity  will  adopt.  These  plans  include 
public  ownership  and  public  management  of  natural  monopolies, 
except  those  which  depend  upon  the  scarcity  of  raw  material, 
in  which  case  he  recommends  public  ownership  with  possibly 
private  management.  Other  suggestions  are  for  educational 
progress  through  conscious  social  effort,  taxation  of  bequests, 
etc.  He  would  have  no  laws  aimed  directly  against  large-scale 
production  or  industrial  combination  itself,  but  only  such  laws 
as  would  regulate  great  private  corporations  for  the  protection 
of  purchasers,  of  employes,  and  of  the  public  at  large.  Through- 
out the  work,  while  the  scientific  and  unbiased  standpoint  is 
everywhere  evident,  there  is  nevertheless  an  underlying  feeling 
that  the  final  criterion  of  judgment  must  be  the  public  welfare. 


One  view:  The  monopoly-trust  system  is  an  accomplished  rev- 
olution, and  therefore  irreversible.  The  other  view:  The  monop- 
oly-trust system  is  simply  an  insurrection  against  both  civil  and 
economic  law,  to  be  suppressed  like  any  other  insurrection. 


138  TRUSTS  OR  COMPETITION? 

MR.  ROCKEFELLER'S  POSITION 

John  D.  Rockefeller,  president  of  the  Standard  Oil  Company,  in  a 
written  statement  submitted  to  the  Industrial  Commission;  Jan.  10, 
1900,  thus  summarized  his  views  concerning  trusts: 

"It  is  too  late  to  argue  about  the  advantage  of  industrial  com- 
binations. Their  chief  advantages  are:  1.  Command  of  necessary 
capital.  2.  Extension  of  limits  9f  business.  3.  Increase  of  number 
of  persons  interested  in  the  business.  4.  Economy  in  the  business. 
5.  Improvements  and  economies  which  are  derived  from  knowledge 
of  many  interested  persons  of  wide  experience.  6.  Power  to  give  the 
public  improved  products  at  less  prices  and  still  make  a  profit  for 
stockholders.  7.  Permanent  work  and  good  wages  for  laborers."  To 
control  trusts  Mr.  Rockefeller  suggested  federal  legislation  under 
which  corporations  may  be  created  and  regulated  if  that  be  possible. 
In  lieu  thereof  he  recommended  state  legislation,  as  nearly  uniform 
as  possible,  encouraging  combinations  of  persons  and  capital  for  the 
purpose  of  carrying  on  industries,  but  permitting  state  supervision, 
not  of  a  character  to  hamper  industries,  but  sufficient  to  prevent  frauds 
upon  the  public. 

The  other  view:  As  shown  in  preceding  pages  (60  to  80)  all  the 
economic  advantages  named  by  Mr.  Rockefeller  are  perfectly  attain- 
able without  resorting  to  monopoly,  yet  monopoly  and  not  economy 
is  the  spinal  column  of  every  typical  trust — like  the  Standard,  for  ex- 
ample. As  President  Hadley  of  Yale  puts  it,  "a  trust  is  an  organiza- 
tion which  makes  increased  economy  of  production  a  pretext  for 
securing  a  monopoly  of  the  market."  As  to  Mr.  Rockefeller's 
remedial  suggestions:  1.  Not  one  state  would  consent  to  his  pro- 
posed transfer  to  the  federal  government  of  jurisdiction  over  the 
chartering  of  industrial  corporations.  2.  Concerning  state  supervision 
sufficient  to  "prevent  frauds  upon  the  public,"  the  central  fraud 
practiced  upon  the  public  by  the  trust  system  consists  of,  or  grows 
from,  the  trust's  capitalistic  and  uneconomic  monopoly.  Imagine  the 
state  of  New  Jersey,  by  which  the  Standard  Oil  Company,  in  com- 
mon .with  ninety-five  per  cent,  of  all  trusts,  is  chartered,  being  asked 
so  to  "supervise"  the  operations  of  that  corporation  as  to  prevent 
it  from  crushing  competition  and  monopolizing  the  market.  The 
trust  is  not  a  passing  skin  disease  of  the  industrial  world,  to  be 
treated  with  soothing  lotions  of  regulation.  It  presents  a  malignant 
tumor  called  industrial  monopoly,  which  simply  requires  the  knife  of 
judicial  surgery.  The  courts  of  the  country,  both  state  and  federal, 
acting  under  the  common  law,  public  policy  and  existing  statutes  are 
quite  competent  and  evidently  disposed,  to  apply  this  heroic  and 
effective  remedy,  as  often  as  test  cases  are  supplied  by  the  people,  and 
that  without  injuring  or  hampering  legitimate,  non-monopolistic  indus- 
trial combinations. 


CHAPTER  IV. 
THE  CHICAGO  TRUST  CONFERENCE. 


Th«  National  Conference  on  Trusts  and  Other  Trade  Com- 
binations, held  in  Chicago  from  September  12  to  16,  1899,  proved 
to  be  a  notable  and  very  useful  event.  It  was  called  together 
at  the  instance  of  the  Civic  Federation,  a  voluntary  association 
of  public-spirited  citizens  of  Chicago.  It  consisted  of  some  four 
hundred  delegates,  mainly  appointed  by  the  governors  of  about 
thirty  states.  Nearly  all  societies  of  national  scope  and  mainly 
interested  in  economic  and  sociological  questions,  were  specially 
represented  by  delegations.  By  invitation  a  number  of  the  best- 
known  professors  of  political  economy  connected  with  American 
universities  were  present,  and  several  presented  papers  which 
received  the  close  attention  of  the  conference  and  the  gathered 
audiences.  Among  these  were  Professors  Clark,  of  Columbia: 
Jeuks,  of  Cornell;  Adams,  of  Ann  Arbor;  Ely,  of  the  University 
of  Wisconsin;  Folwell,  of  the  University  of  Minnesota;  John 
Graham  Brooks,  lecturer  at  the  University  of  Chicago,  and 
Bemis,  of  the  Bureau  of  Economic  Research. 

The  central  idea  in  summoning  the  conference  was  that  it 
should  be  wholly  non-partisan  in  its  make-up  and  spirit  and 
wholly  educational  in  its  purpose.  This  was  happily  carried  out 
in  practice.  No  resolutions  were  adopted  and  no  addresses  to 
the  country  formulated,  for  this  would  have  been  wholly  foreign 
to  the  plan  of  the  gathering.  While  the  debates  were  earnest  and 
developed  wide  divergence  of  view  among  delegates,'  excellent 
temper  prevailed,  good  manners  ruled,  and  at  the  close  5t  was 
apparent  that  most  of  the  delegates  were  returning  home  having 


140  TRUSTS  OR  COMPETITION '? 

more  respect  for  opposing  opinions  and  at  least  a  suspicion  that 
there  were  two  sides  to  the  trust  question. 

There  was  no  well-defined  alignment  of  delegates  as  cham- 
pions and  enemies  of  trusts.  While  both  extremes  were  repre- 
sented, all  shades  and  grades  of  intermediate  opinion  were  in 
evidence.  It  happened  many  times  that  prominent  speakers 
would  be  well  advanced  in  an  address  before  one  could  decide 
where  they  were  going  to  land.  A  rough  attempt  at  classification 
of  the  delegates  according  to  their  attitude  on  the  central  theme 
would  perhaps  result  thus:  First,  a  group  coming  mainly  from 
the  West  and  South,  and  for  whom  Mr.  Wooten  of  Texas  and 
Hon.  W.  J.  Bryan  of  Nebraska  served  as  eloquent  spokesmen. 
These  came  and  went  in  the  firm  conviction  that  the  combina- 
tion for  doing  away  with  competition,  and  the  great  corporation 
which  aims  at  practical  monopoly  of  an  entire  industry,  commonly 
called  a  "trust,"  are  evil  and  only  evil,  "indefensible  and  In- 
tolerable," as  Mr.  Bryan  put  it,  to  be  first  restrained  and  then, 
as  soon  as  practicable,  annihilated.  Second,  at  the  other  pole, 
was  a  group  ably  represented  by  W.  Bourke  Cock  ran  and  Prof. 
George  Gunton,  the  New  York  editor-economist,  whose  conten- 
tion is  that  the  modern  trust  is  distinctly  an  economic  evolution, 
the  logical  and  salutary  outcome  of  past  competition,  to  be 
welcomed  and  not  assailed;  that  the  trust  has  "come  to  stay," 
and  that  its  extirpation,  even  if  it  were  possible,  would  be 
undesirable  and  disastrous.  This  sentiment  was  approved  by 
one  o^  two  delegates  from  the  central  states,  like  ex-Governor 
Foster,  of  Ohio.  The  exponents  of  this  view  agreed,  however, 
in  conceding  that  legislation,  state  and  federal,  should  provide 
such  regulations  as  experience  might  show  to  be  necessary  to 
protect  the  public  against  possible  abuse  of  the  new  power. 
Third,  between  these  two  positive  groups  appeared  to  be  the 
majority  of  the  delegates,  some  of  whom  had  not  made  up 
their  own  minds,  some  of  whom  apparently  did  not  care  to  go 
on  record  in  a  definite  way  at  so  early  a  stage  of  the  country's 
great  debate;  many  of  whom  had  and  expressed  grave  appre- 
hensions as  to  the  outcome  of  the  trust  movement,  while  at 
a,  loss  to  discover  any  remedy,  even  i;f  tfcftt  movement  sboujld, 


CHICAGO  TRUST  CONFERENCE.  l4l 

prove  wholly  bad.  In  private  conversation  with  delegates  one 
discovered  that  the  instinctive  opposition  to  the  monopolistic 
side  of  the  trust  phenomenon  was  more  general  and  more  pro- 
nounced than  the  public  speaking  indicated.  For  the  most  part 
the  professors  of  political  economy  who  addressed  the  confer- 
ence confined  themselves  to  stating  the  case,  and  pointing  out 
both  the  benefits  and  the  disadvantages  of  the  new  order,  with- 
out balancing  the  account  and  pronouncing  judgment  for  or 
against  the  trust.  This  will  be  observable  in  papers  by  Pro- 
fessors Jenks,  Clark  and  Adams,  the  text  of  which  is  given 
herein. 

One  marked  peculiarity  in.  the  public  debate,  noticeable  at 
the  time  and  clearly  shown  in  the  published  addresses,  was  this: 
Most  of  the  outspoken  advocates  of  the  trust  system  studiously 
avoided  the  use  of  the  word  monopoly  and  all  reference  to  the 
fact  of  monopoly  as  either  substantially  attained  or  aimed  at 
by  the  typical  trust,  and  almost  without  exception  they  carried 
the  impression  that  anti-trust  sentiment  is  simply  opposition 
to  large  corporations  or  large  aggregations  of  capital  as  such. 
On  the  other  hand,  none  of  those  who  could  fairly  be  regarded 
as  exponents  of  the  anti-trust  sentiment,  made  any  attack  what- 
ever on  great  industrial  corporations  as  such  or  on  the  great 
concentrations  of  capital  necessary  to  equip  and  run  them.  It 
was  the  monopoly  feature  and'  that  alone  which  was  the  object 
of  both  denunciation  and  adverse  argument.  It  is  important  to 
make  this  point  clear,  since,  so  far  as  the  recent  conference  is 
evidence,  it  shows  that  no  war  is  being  made  on  capital  or  on 
corporations  as  such,  by  any  class  or  section;  that  it  is  only 
when  great  capital  and  the  corporate  form  of  organization  are 
employed  as  a  means  of  systematically  monopolizing  or  at- 
tempting to  monopolize  an  industry  or  a  branch  of  trade  that 
they  encounter  resistance  and  rebuke.  The  peculiarity  here 
pointed  out  obviously  detracted  from  the  value  of  the  debate, 
for  to  a  great  extent  the  two  sides  were  firing  at  a  wholly 
different  target.  As  one  spectator  put  it,  Mr.  Bryan  and  his 
colleagues  attacked  private  monopoly,  which  the  typical  trusts 
certainly  represent,  and  which  nobody  dared  openly  defend; 


142  TRUSTS  OR  COMPETITION? 

while  Mr.  Cockran  and  Professor  Gunton  vigorously  defended 
"large  corporations"  and  their  necessary  concentrations  of  cap- 
ital, which  nobody  accused.  The  attitude  taken  at  the  Confer- 
ence by  the  representatives  of  workingmen  showed  pretty  clearly 
that  organized  labor  cannot  be  relied  on  to  oppose  trusts  with 
any  approach  to  unanimity. 

That  the  conference  has  served  to  stir  public  thought,  as 
few  recent  events  have  done,  is  evident  enough.  That  it  has 
wrought  corresponding  benefit  is  equally  manifest  Among 
other  things,  it  has  developed  the  fact  that  no  public  question 
since  the  civil  war  of  18G1  has  taken  so  deep  a  hold  upon  all 
classes  of  our  people  in  all  sections  of  the  Republic. 

We  have  endeavored  to  reproduce  herein  every  fresh  or 
important  thought  on  the  trust  question  which  the  conference 
developed,  but  so  far  as  possible  without  repetition.  At  a  gath- 
ering where  each  principal  speaker  aims  to  cover  the  whole 
subject  instead  of  specializing,  much  duplication  of  utterance 
is  inevitable.  No  attempt  is  made  to  follow  the  order  of  ad- 
dresses at  the  conference,  but  papers  and  extracts  are  grouped 
topically  as  far  as  practicable. 


PRIVATE  MONOPOLY  INDEFENSIBLE 

Causes  of  the  Trust  System— Its  Breeding  Grounds  in  New  Jersey  and 
Delaware— Purposes  of  the  Trust— Human  Character  More  Important 
Than  Dollars — The  High-road  to  Aristocracy — Agriculture  Under  the 
Rule  of  Trusts— God-made  Men  Among  Man-made  Giants— Regulation 
and  Suppression  Demanded— A  Remedial  Plan  Suggested. 

HON.  WILLIAM  J.  BRYAN,  before  the  Chicago  Trust  Conference. 

I  come  this  morning  to  discuss  in  your  presence  a  great  question 
— a  question  of  growing  importance  to  the  American  people.  This 
trust  principle  is  not  new,  but  it  is  manifesting  itself  in  so  many 
ways  and  the  trusts  have  grown  so  rapidly  that  people  now  feel 
alarmed  about  trusts  who  did  not  feel  alarmed  three  years  ago. 
The  trust  question  has  grown  in  importance,  because  within  two 
years  more  trusts  have  been  organized,  when  we  come  to  consider 
the  capitalization  and  the  magnitude  of  the  interests  involved,  than 
were  organized  in  all  the  previous  history  of  the  country,  and  the 


HON.  WILLIAM  J.  BRYAN  ON  TRUSTS.  143 

people  now  come  face  to  face  with  this  question:  Is  the  trust  a 
blessing  or  a  curse?  If  a  curse,  what  remedy  can  be  applied  to 
the  curse? 

ALL  PRIVATE  MONOPOLY  INTOLERABLE. 

I  start  with  the  declaration  that  monopoly  in  private  hands  is 
indefensible  from  any  standpoint  and  intolerable.  I  make  no 
exceptions  to  the  rule.  I  do  not  divide  monopolies  in  private  hands 
into  good  monopolies  and  bad  monopolies.  There  is  no  good  monopoly 
in  private  hands.  There  can  be  no  good  monopoly  in  private  hands 
until  the  Almighty  send?  us  angels  to  preside  over  us.  There  may 
be  a  despot  who  is  better  than  another  despot,  but  there  is  no  good 
despotism.  One  trust  may  be  less  harmful  than  another.  One  trust 
magniate  may  be  more  benevolent  than  another,  but  there  is  no 
good  monopoly  in  private  hands,  and  I  do  not  believe  it  is  safe  for 
society  to  permit  any  man  or  group  of  men  to  monopolize  any  article 
of  merchandise  or  any  branch  of  business. 

What  is  the  defense  made  of  the  monopoly?  The  defense  of  the 
monopoly  is  always  placed  on  the  ground  that  if  you  will  allow  peo- 
ple to  control  the  market  and  fix  the  price  they  will  be  good  to  the 
people  who  purchase  of  them.  The  entire  defense  of  the  trusts  rests 
upon  a  money  argument.  If  the  trust  will  sell  to  a  man  an  article 
for  a  dollar  less  than  the  article  will  cost  under  other  conditions, 
then  in  the  opinion  of  some  that  proves  a  trust  to  be  a  good  thing. 
In  the  first  place  I  deny  that  under  a  monopoly  the  price  will  be 
reduced.  In  the  second  place,  if  under  a  monopoly  the  price  is  re- 
duced the  objections  to  a  monoply  from  other  standpoints  far  out- 
weigh the  financial  advantage  that  the  trust  would  bring.  But  I 
protest  in  the  beginning  against  settling  every  question  upon  the  dol- 
lar argument.  I  protest  against  the  attempt  to  drag  every  question 
down  to  the  low  level  of  dollars  and  cents. 

In  1859  Abraham  Lincoln  wrote  a  letter  to  some  people  in  Bos- 
ton, and  in  the  course  of  fhe  letter  he  said:  "The  Republican  party 
believes  in  the  man  and  the  dollar,  but  in  case  of  conflict  it  believes 
in  the  man  before  the  dollar."  In  the  early  years  of  his  administra- 
tion he  sent  a  message  to  Congress,  and  in  that  message  he  warned 
his  countrymen  against  the  approach  of  monarchy.  And  what  was 
it  that  alarmed  him?  He  said  it  was  the  attempt  to  put  capital  upon 
•an  equal  footing  with,  if  not  above,  labor  in  the  structure  of  govern- 
ment, and  in  that  attempt  to  put  capital  even  upon  an  equal  foot- 
ing with  labor  in  the  structure  of  government  he  saw  the  approach 
of  monarchy.  Lincoln  was  right.  Whenever  you  put  capital  upon 
an  equal  footing  with  labor,  or  above  labor,  in  the  structure  of  gov- 
ernment you  are  on  the  road  toward  a  government  that  rests  not  upon 
reason  but  upon  force.  Nothing  is  more  important  than  that  we  shall 
in  the  beginning  rightly  understand  the  relation  between  money  and 
man.  Man  is  the  creature  of  God  and  money  is  the  creature  of 
man.  Money  is  made  to  be  the  servant  of  man— and  I  protest  against 
all  theories  that  enthrone  money  and  debase  mankind." 


144  TRUSTS  OR  COMPETITION? 

THE  PURPOSES  OF  THE  TRUSTS. 

What  is  the  purpose  of  the  trust  or  the  monopoly?  For  when  I 
use  the  word  trust  I  use  it  in  the  sense  that  the  trust  means 
monopoly.  And  what  is  the  purpose  of  monopoly?  If  you  want  to 
find  out  you  can  do  so  from  the  speeches  made  by  those  who  are 
connected  with  the  trusts. 

[Here  Mr.  Bryan  quoted  from  an  address  delivered  by  Mr. 
Charles  R.  Flint,  of  New  York  City,  in  May,  1899.  Mr.  Flint  has 
been  prominently  identified  with  the  organization  of  several  of  the 
largest  trusts.— Editor.] 

In  explaining  the  merits  of  the  trust  system  Mr.  Flint  said:  (1) 
"We  thus  secure  the  advantage  of  large  aggregations  of  capital  and 
ability.  *  *  *  Raw  material  bought  in  large  quantities  is  secured 
at  lower  prices." 

We  see.  then,  what  is  the  first  advantage.  One  man  to  buy  wool 
for  all  the  woolen  manufacturers!  That  means  that  every  man  who 
sells  wool  must  sell  it  at  the  price  fixed  by  this  one  purchaser  in 
the  United  States.  Thus  the  first  thing  is  to  lower  the  price  of  raw 
material.  The  great  majority  of  the  people  are  engaged  in  the 
production  of  raw  material  and  in  the  purchase  of  finished  products. 
It  is  but  comparatively  few  who  can  stand  at  the  head  of  syndi- 
cates and  monopolies  and  secure  the  profits  from  them.  Therefore, 
the  first  advantage  of  a  monopoly  is  to  lower  the  price  of  the  raw  ma- 
terial furnished  by  the  people  to  that  combination. 

Mr.  Flint  next  says:  (2)  "Those  plants  which  are  best  equipped 
and  most  advantageously  situated  are  run  continuously  and  in  prefer- 
ence to  those  less  favored."  The  next  thing  is,  after  you  have 
bought  all  the  factories,  to  close  some  of  them  and  turn  out  of  em- 
ployment the  men  who  are  engaged  in  them — and  if  you  will  go  about 
over  the  country  you  will  see  where  people  have  subscribed  money 
to  establish  enterprises,  and  where  these  enterprises,  having  come 
under  the  control  of  the  trusts,  have  been  closed  and  stand  now  as 
silent  monuments  to  the  wisdom  of  the  trust  system.  (3)  "In  case 
of  local  strikes  and  fires,  the  work  goes  on  elsewhere,  thus  prevent- 
ing serious  loss."  Do  not  the  laboring  men  understand  what  that 
means?  It  means  that  if  the  people  employed  in  one  factory  are 
not  satisfied  with  the  terms  fixed  by  the  employer  and  strike,  they 
can  close  that  factory  and  let  the  employes  starve  while  they  go  on 
in  other  factories  without  loss  to  the  manufacturers. 

It  means  that  when  they  have  frozen  out  the  striking  employes 
in  one  factory  and  compelled  them  to  come  back  to  work  at  any 
price  to  secure  bread  for  their  wives  and  children  they  can  provoke 
a  strike  somewhere  else  and  freeze  them  out  there,  and  when  a 
branch  of  industry  is  entirely  in  the  hands  of  one  great  monopoly,  so 
that  every  skilled  man  in  that  industry  has  to  go  to  the  one  man 
for  employment,  then  that  one  man  will  fix  wages  as  he  pleases  and 
the  laboring  men  will  share  the  suffering  of  the  man  who  sells  the 
raw  material. 

BRAINS  NEED  NOT  APPLY, 

(4)  "There  is  no  multiplication  of  the  means  of  distribution 
and  a  better  force  of  salesmen  takes  the  place  of  a  large  number." 
I  want  to  warn  you  that  when  the  monopoly  has  absolute  control, 


HUMAN  SELFISHNESS  NEEDS  RESTRAINT.  145 

brains  will  be  at  a  discount,  and  relatives  will  be  necessary  to  fill 
these  positions.  When  there  is  competition  every  employer  has  to 
get  a  good  man  to  meet  competition,  but  when  there  is  no  competition 
anybody  can  sit  in  the  office  and  receive  letters  and  answer  them 
when  everybody  has  to  write  to  the  same  house  for  anything  he 
wants.  There  is  no  question  about  it.  A  trust,  a  monopoly,  can 
lessen  the  cost  of  distribution.  But  when  it  does  so  society  has  no 
assurance  that  it  will  get  any  of  the  benefits  from  that  reduction  of 
cost  in  reduction  of  price.  But  you  will  take  away  the  necessity  for 
that  skill,  for  that  brains.  You  will  take  away  the  stimulus  that 
has  given  to  us  the  quickness,  the  alertness  of  the  commercial  trav- 
eler, and  these  men,  these  commercial  evangelists  who  go  from  one 
part  of  the  country  to  the  other,  carrying  the  merits  of  their  respect- 
ive goods,  will  not  be  needed,  because  when  anybody  wants  them  all 
he  has  to  do  is  to  write  to  the  one  man  who  has  the  things  for  sale, 
and  say,  'What  will  you  let  me  have  it  for  to-day?' 

(5)  "Terms  and  conditions  of  sale  become  more  uniform,  and 
credit  can  be  more  safely  granted."  He  cannot  only  fix  the  price  of 
what  he  sells,  but  he  can  fix  the  terms  upon  which  he  sells.  You 
can  pay  cash,  or,  if  there  is  a  discount,  it  is  just  so  much  discount, 
and  you  have  to  trust  to  that  man's  generosity  and  his  decision  upon 
what  is  fair  wheni  he  is  on  one  side  and  you  on  the  other.  I  have 
read  these  only  as  some  of  the  advantages  which  a  great  trust  mag- 
nate thinks  will  come  from  the  trust. 

What  is  the  first  thing  to  be  expected  of  a  trust?  That  it  will 
cut  down  expenses.  What  is  the  second?  That  it  will  raise  prices. 
We  have  not  had  in  this  couotry  a  taste  of  a  complete  trust,  a  com- 
plete monopoly,  and  we  cannot  tell  what  will  be  the  results  of  a 
complete  monopoly  by  looking  at  the  results  that  have  followed 
the  attempts  to  secure  a  monopoly.  Pending  such  attempts  the 
trusts  have  often  lowered  prices  temporarily  as  a  means  of  ridding 
themselves  of  remaining  competitors.  But  when  it  has  rid  itself  of 
competitors,  what  is  going  to  be  the  result?  My  friends,  all  you  have 
to  know  is  human  nature.  God  made  men  selfish.  I  do  not  mean  to 
say  He  made  a  mistake  when  He  did,  because  selfishness  is  merely 
the  outgrowth  of  an  instinct  of  self-preservation.  It  is  the  abnormal 
development  of  a  man's  desire  to  protect  himself;  but  everybody  who 
knows  human  nature  knows  how  easy  it  is  to  develop  that  side  of  a 
man's  being.  Occasionally  I  find  a  man  who  says  he  is  not  selfish, 
but  when  I  do  I  find  a  man  who  can  prove  it  only  by  his  own 
affidavit. 

[Here  the  speaker  illustrated  the  necessity  of  curbing  the  greed 
of  great  combinations  by  referring  to  the  practice  on  Western  farms 
of  putting  rings  in  the  noses  of  swine.  "So  that  while  getting 
fat  they  may  not  destroy  more  than  they  are  worth."]  One  of  the 
great  purposes  of  government  is  to  put  rings  in  the  noses  of  hogs.  I 
don't  mean  to  say  anything  offensive,  but  we  are  all  hoggish.  In 
hours  of  temptation  we  are  likely  to  trespass  upon  the  rights  of 
others. 

I  believe  in  self-government.  Why?  Because  in  their  sober 
moments  the  people  have  helped  to  put  rings  in  their  own  noses  to 
protect  others  from  themselves  and  themselves  from  others  in  hours 

10 


146 

of  temptation.  And  so  I  believe  we  must  recognize  human  nature. 
We  must  recognize  selfishness  and  we  must  so  make  our  laws  that 
people  shall  not  be  permitted  to  trespass  upon  the  rights  of  others 
in  their  efforts  to  secure  advantages  for  themselves.  *  *  * 
And  I  believe  the  principle  of  monopoly  finds  its  inspiration  in  the 
desire  of  men  to  secure  by  monopoly  what  they  cannot  secure  in 
the  open  field  of  competition. 

CAUSES    OF    TRUSTS— SILVER    DEMONETIZATION,    TARIFF,    ETC. 

I  will  not  ask  you  all  to  agree  with  me,  but  we  have  not  mtt 
here  as  a  body  of  men  who  agreed.  We  have  met  here  as  a  body  01 
men  who  were  seeking  light  and  each  ought  to  be  willing  to  hear 
what  every  other  has  to  say,  and  each  of  us  should  desire  the 
triumph  of  that  which  is  true  more  than  the  triumph  of  that 
which  he  thinks  may  be  true. 

Let  me  repeat  that  (1)  the  primary  cause  of  these  great  combina- 
tions is  the  love  of  money  and  the  desire  to  secure  the  fruits  of 
monopoly;  but  I  believe  (2)  that  falling  prices  caused  by  a  rising 
dollar  have  contributed  to  this  desire  and  intensified  it,  because  peo- 
ple with  their  plants,  seeing  the  fall  in  prices  and  measuring  the 
loss  on  investments,  have  looked  about  for  some  means  by  which 
they  could  protect  themselves  from  this  loss,  and  they  have  joined  in 
combinations  to  hold  up  prices  to  protect  their  investments  from  a 
loss  which  would  not  have  occurred  but  for  the  rise  in  the  value  of 
dollars  and  the  fall  in  the  level  of  prices. 

(3)  Another  thing  that,   in  my   judgment,   has  aided   monopoly 
is  a  high  tariff.    Nobody  can  dispute  that  a  tariff  law,  an  import  duty, 
enables  a  trust  to  charge  for  its  product  the  price  of  a  similar  for- 
eign product  plus  the  tariff. 

Now  some  have  suggested  that  to  put  everything  on  the  free 
list  that  trusts  make  would  destroy  the  trusts.  I  do  not  agree  with 
this  statement  as  it  is  made  so  broadly.  I  believe  that  the  high 
tariff  has  been  the  means  of  extortion  and  that  it  has  aided  the 
trust  to  collect  more  than  the  trust  otherwise  could  collect.  But  I 
do  not  believe  you  could  destroy  all  trusts  by  putting  all  trust- 
made  articles  on  the  free  list.  Why?  Because,  if  an  article  can 
be  produced  in  this  country  as  cheaply  as  it  can  be  produced  abroad 
the  trust  could  exist  without  the  benefit  of  any  tariff,  although  it 
could  not  extort  so  much  as  it  could  with  the  tariff,  and  while  some 
relief  may  come  from  modifications  of  the  tariff,  we  cannot  destroy 
monopoly  until  we  lay  the  ax  on  the  root  of  the  tree  and  make 
monopoly  impossible  by  law. 

(4)  It  has  been  suggested  that  discrimination  by  railroads  has 
aided  the  trusts.    No  question  about  it.    If  one  man  can  secure  from 
a  railroad  better  rates  than  another  man,  he  will  be  able  to  run  the 
other  man  out  of  business.    And  there  is  no  question  that  discrimi- 
nation   and    favoritism    secured    by    one    corporation    against    an- 
other producer  and  a  rival  have  been  largely  instrumental  in  en- 
abling a  desired  monopoly  to  become  practically  a  complete  monopoly. 
Now  that  can  be  remedied  by  laws  that  will  prevent  this  discrimina- 
tion, but  when  we  prevent  the  discrimination,  when  we  place  every 


BREEDING  GROUNDS  OF  TRUSTS.  147 

producer  upon  the  same  footing  and  absolutely  prevent  favoritism, 
monopoly  may  still  exist.  The  remedy  must  go  farther.  It  must 
be  complete  enough  to  prevent  the  organization  of  a  monopoly. 

NEW   JERSEY   AND   DELAWARE   CORPORATION    LAW. 

I  do  not  believe  the  people  of  one  state  can  rely  upon  the  peo- 
ple of  another  state  in  this  matter  of  corporate  regulation,  where  a 
corporation  organized  in  one  state  wishes  to  carry  on  business  in 
other  states.  I  might  give  you  reasons,  but  I  have  here  a  letter 
that  was  sent  out  by  a  trust  company  of  Delaware.  It  has  an 
office  in  New  York!  and  it  is  the  most  remarkable  document  on  this 
subject  that  has  ever  fallen  under  my  observation.  It  shows  that 
in  Delaware  they  adopted  a  law  for  the  purpose  of  making  Delaware 
more  favorable  to  the  trusts  than  New  Jersey.  The  letter  says: 

"The  State  of  Delaware  has  just  adopted  the  most  favorable  of 
existing  general  corporation  laws— one  marking  a  forward  step  in  the 
evolution  of  corporations.  It  does  not  encourage  reckless  incorporation, 
nor  permit  the  existence  of  wild-cat  companies,  but  it  furnishes  at  the 
least  expense  ample  rights  to  stockholders  and  reduces  restrictions 
upon  corporate  action  to  the  minimum. 

"The  enactment  is  not  the  result,  as  in  the  case  of  most  states,  of 
hesitating,  halting,  enacting,  amending  and  repealing,  but  is  a  logical  and 
systematic  measure  framed  by  a  committee  of  able  lawyers  appointed 
by  the  legislature  to  examine  the  various  statutes  of  the  various  states 
and  prepare  a  bill  which  should  embody  the  good  and  eliminate  the 
the  bad  points  of  existing  law.  The  law  is  based  broadly  upon  that  of 
the  state  of  New  Jersey  and  embraces  all  the  beneficial  provisions  and 
safeguards  found  in  the  laws  of  that  state.  It  is,  however,  in  many 
respects,  advanced  far  beyond  New  Jersey,  and  makes  Delaware  a  much 
more  attractive  home  for  business  corporations. 

"In  the  following  salient  provisions  the  Delaware  and  New  Jersey 
laws  are  substantially  identical.  1.  Any  three  persons  may  organize  a 
corporation.  2.  It  may  engage  in  any  lawful  business  excepting  bank- 
ing. 3.  Its  existence  may  be  perpetual  or  limited.  4.  It  may  purchase 
and  deal  in  real  or  personal  property  wherever  situated,  and  to  any 
desired  amount.  5.  It  may  be  a  mortgagee  or  a  mortgagor.  6.  It  may 
conduct  business  anywhere  in  the  world.  7.  Stock  may  be  issued  for 
property  purchased,  and  in  Delaware  for  services  rendered,  and  in  the 
absence  of  fraud  the  judgment  of  the  directors  as  to  the  value  of  such 
property  or  services  is  conclusive.  8.  It  may  easily  wind  up  its  affairs 
and  dissolve  itself.  9.  Its  authorized  capital  stock  need  not  be  more 
than  $2,000,  and  only  $1,000  of  this  need  be  subscribed  for.  10.  The 
amount  of  capital  stock  which  it  may  issue  is  unlimited.  11.  It  may  file 
its  certificate  of  incorporation  and  even  begin  business  before  any  sum 
whatever  is  paid  in.  12.  It  may  have  different  classes  of  stocks,  with 
different  privileges  or1  restrictions.  13.  The  charter  may  be  easily 
amended.  14.  Only  one  director  need  be  a  resident  of  Delaware.  15. 
Capital  stock  may  be  easily  diminished  or  increased.  16.  The  corpora- 
tion may  be  readily  merged  or  consolidated  into  other  corporations.  17. 
The  Incorporators  may  or  may  not  limit  the  authority  of  the  directors 
as  to  the  liabilities." 

ADVANTAGES  IN  DELAWARE. 

And  after  giving  us  these  points  of  similarity  the  letter  proceeds  as 
follows:  "The  Delaware  law  possesses  the  following  advantages:  1.  The 
original  fee  that  we  pay  for  Incorporation  is  small— about  three-quarters 


148  TRUSTS  OR  COMPETITION t 

of  that  of  New  Jersey.  2.  The  annual  tax  is  small— one-half  of  that  of 
New  Jersey.  Delaware  is  a  small  state  and  does  not  need  very  large 
revenue.  3.  Stockholders  and  directors  may  hold  their  meetings  wherever 
they  please  and  need  never  meet  in  the  state  of  Delaware.  New  Jersey 
stockholders  must  meet  in  that  state.  You  see,  it  is  a  decided  ad- 
vantage over  the  New  Jersey  law  in  that  respect.  4.  The  original  stock 
and  transfer  books,  which  in  a  New  Jersey  corporation  must  be  kept  in 
the  state,  may  be  kept  in  or  out  of  Delaware,  in  the  discretion  of  the 
company.  5.  The  examination  of  the  books  by  intermeddlers  is  much 
more  difficult  under  the  Delaware  law  than  under  the  laws  of  any  other 
state.  6.  The  liability  of  the  stockholders  is  absolutely  limited  when 
the  stock  has  once  been  issued  for  cash,  property  or  services.  7.  Stock 
may  be  issued  in  compensation  for  services  rendered,  and  in  the  absence 
of  fraud  in  the  transaction  the  judgment  of  the  directors  as  to  the 
value  of  such  services  is  conclusive.  8.  For  certain  classes  of  corpora- 
tions, as  for  instance,  railroads,  telegraph,  cable,  electric  light,  steam- 
heating  power,  gas-piping  lines  and  sleeping  car  companies,  the  advantage 
is  still  more  marked." 

[I  wish  we  had  some  way  of  knowing  what  the  additional  advantages 
are,  after  having  read  the  ordinary  advantages.]  "9.  The  annual  report 
of  a  Delaware  corporation  is  required  to  give  no  secret  or  confidential 
information.  10.  The  certificate  need  not  show  nor  need  public  record  be 
in  any  way  made  of  the  amount  of  stock  subscribed  by  any  incor- 
porator." 

I  have  read  this  letter  to  show  you  that  where  a  state  can  gain 
an  advantage  from  the  incorporation  of  these  great  aggregations  of 
wealth,  it  is  not  safe  to  place  the  people  of  other  states  at  the 
tender  mercies  of  the  people  of  such  a  state  as  may  desire  to  secure 
its  running  expenses  from  the  taxation  of  corporations  organized  to 
prey  upon  people  outside — to  show  how  impossible  it  is  for  us  in  one 
state  to  depend  for  protection  upon  the  people  in  another  state;  and 
while,  as  I  say,  I  believe  the  people  of  every  state  should  have  the 
power  to  create  corporations  and  restrain  and  limit  or  annihilate, 
yet  I  believe  no  complete  remedy  can  be  found  for  the  trust  until  the 
federal  government,  with  a  power  sufficiently  comprehensive  to 
reach  into  every  nook  and  corner  of  the  country,  shall  lay  its  hands 
upon  these  trusts  and  declare  that  they  shall  no  longer  exist. 

TRUST  REMEDIES  SUGGESTED. 

Now  what  can  be  done  to  prevent  the  organization  of  a 
monopoly?  I  rather  think  we  differ  more  in  remedy  than  we  do  in 
our  opinion  of  the  trust.  I  venture  to  guess  that  few  people  will 
defend  the  trust  as  a  principle,  or  a  trust  organization  as  a  good 
thing,  but  I  imagine  our  great  difference  will  be  as  to  remedy,  and 
I  want,  for  a  moment,  to  discuss  the  remedy. 

We  have  a  dual  form  of  government.  We  have  a  state  govern- 
ment and  a  federal  government,  and  while  this  dual  form  of  govern- 
ment has  its  advantages,  and  to  my  mind  advantages  which  can 
hardly  be  overestimated,  yet  it  also  has  its  disadvantages.  When 
you  prosecute  a  trust  in  the  United  States  court  it  hides  behind 
state's  sovereignty,  and  when  you  prosecute  it  in  the  state  court  it 
rushes  to  cover  under  federal  jurisdiction — and  we  have  had  some 
difficulty  in  applying  a  remedy. 

I  believe  we  ought  to  hare  remedies  in  both  state  and  nation, 


MR.  BRYAN'S  PROPOSED  REMEDIES.  149 

and  that  they  should  be  concurrent  remedies.  I  submit,  not  neces- 
sarily as  the  best  plan,  but  as  a  plan,  the  following: 

First,  That  the  state  has  or  should  have  the  right  to  create 
whatever  private  corporations  the  people  of  the  state  think  best. 

Second,  That  each  state  has,  or  should  have,  the  right  to  impose 
such  limitations  upon  an  outside  corporation  as  the  people  of  the 
state  may  think  necessary  for  their  own  protection.  That  protects 
the  rights  of  the  people  of  the  state  to  say,  first,  what  they  shall 
organize  in  their  state  as  a  corporation,  and,  second,  what  they  shall 
permit  as  a  corporation  to  come  from  other  states  and  do  business 
in  their  state. 

Third?  That  the  federal  government  has,  or  should  have,  the 
right  to  impose  such  restrictions  as  Congress  may  think  necessary 
upon  any  corporation  which  does  business  outside  of  the  state  in 
which  it  is  organized.  In  other  words,  I  would  preserve  to  the 
people  of  the  state  all  the  rights  that  they  now  have,  and  at  the 
same  time  have  Congress  exercise  a  concurrent  remedy,  even,  to 
the  point  of  prohibition,  to  supplement  the  state  remedy.  When  the 
federal  government  licensed  a  corporation  to  do  business  outside  of 
the  state  in  which  it  was  organized,  it  would  merely  permit  it  to  do 
business  in  any  state,  under  the  conditions  imposed  by  that  state, 
in  addition  to  the  conditions  imposed  by  the  federal  government 
I  would  not  take  away  from  the  people  of  the  state,  any  right  now 
existing,  but  I  would  have  the  federal  government  and  the  state 
government  exercise  the  powers  that  may  be  necessary  to  annihilate 
the  monopoly.  And  I  believe  it  is  possible  to  annihilate  a 
monopoly,  and  when  I  hear  gentlemen  pessimistically  destroying  by 
their  objections  every  suggested  remedy,  yet  suggesting  no  other,  I 
am  reminded  of  those  cheerful  lines: 

"Plunged  in  a  gulf  of  dark  despair, 
Ye  wretched  sinners  lie." 

FORM  OF  FEDERAL  ACTION. 

As  to  the  form  which  federal  action  shall  take,  this  seems  to 
me  a  complete  method,  but  it  may  not  meet  your  approval; 

That  Congress  should  pass  a  law  providing  (1)  that  no  corpora- 
tion organized  in  any  state  should  do  business  outside  of  the  state 
in  which  it  is  organized  until  it  receives  from  some  power  created  by 
Congress  a  license  authorizing  it  to  do  business  outside  of  its  own* 
state.  (2)  That  such  license  should  only  issue  upon  these  three 
conditions: 

I.  That  the  corporation  so  applying  for  a  license  to  do  business 
outside    of   the    state    where    incorporated    shall    have    no    watered 
stock. 

II.  That  there  shall  be  thorough  and  regular  publicity   of   all 
transactions    and    business    of    the    company    affecting    the    public 
welfare. 

III.  That   the   petitioning   corporation   shall    neither    have   nor 
attempt  to  secure  a  monopoly  of  any  branch  of  business  or  of  any 
commodity.    [Violation  of  any  such  requirement  to  work  a  revoca- 
tion of  license.] 


150  TRUSTS  OR  COMPETITION  t 

As  to  the  constitutionality  of  such  a  law  my  thought  is  that 
Congress  should  enact  it  and  if  it  should  be  declared  unconstitutional 
by  the  supreme  court  then  I  am  in  favor  of  so  amending  the  federal 
constitution  as  to  give  Congress  the  power  to  destroy  every  trust  in 
the  country. 

I  may  be  mistaken,  but  as  I  have  studied  the  subject  it  has 
seemed  to  me  that  this  method  of  dealing  with  the  trusts  would 
prove  an  effective  method;  but  if  you  once  establish  the  system 
and  require  the  license,  then  congress-  can  from  year  to  year  add 
such  new  conditions  as  may  be  necessary  for  the  protection  of  the 
public  from  the  greed  and  avarice  of  great  aggregations  of  wealth. 

OVERCAPITALIZATION-WATERED  STOCK. 

As  to  watered  stock  I  don't  agree  with  those  who  say  it  is  a  matter 
entirely  immaterial  whether  a  corporation  has  water  in  its  stock 
or  not.  It  is  true  that  in  the  long  run — if  you  are  able  to  run  as 
long  as  the  run  is!  you  may  squeeze  the  water  out  of  the  stock,  but 
during  all  that  time  the  harm  goes  on;  during  all  that  time  the  trust 
demands  the  right  to  collect  dividends  upon  capital  represented  by 
no  money  whatever.  I  do  not  believe  any  state  should  permit  the 
organization  of  any  corporation  with  a  single  drop  of  water  in  its 
stock.  The  farmer  cannot  inflate  the  value  of  his  land  by  watering 
the  value  of  that  land.  The  merchant  in  the  store  cannot  inflate  the 
value  of  the  goods  upon  his  shelves.  Why  should  the  corporation 
be  permitted  to  put  out  stock  that  represents  no  real  value?  There 
are  instances  in  these  trust  organizations  where  the  stock  represents 
$4,  yes  as  high  as  $12,  of  water  to  $1  of  money.  No  man  can  defend 
stock  that  does  not  represent  money  invested,  and  only  in  the  case 
of  a  monopoly  can  you  secure  dividends  upon  stock  that  does  not 
represent  money  invested.  You  will  find  that  if  the  watering  of 
the  stock  is  permitted  the  cry  of  the  "innocent  purchaser"  is  raised, 
and  you  will  be  told  that  you  must  protect  the  man  who  bought  this 
stock.  My  judgment  is  thait  no  man  can  stand  in  the  position  of 
an  innocent  purchaser  who  buys  stock  in  a  corporation  if  that  stock 
is  not  represented  by  actual  money  invested,  because  he  can  find 
out  what  the  stock  stands  for  if  he  will  only  investigate. 

But  we.had  a  case  in  Nebraska  in  which  we  tried  to  regulate  rail- 
road rates,  and  one  railroad  in  our  state  was  capitalized  and  bonded 
for  more  than  five  times  what  it  would  cost  to  duplicate  the  road, 
and  yet  the  judge  held  that  in  fixing  rates  and  in  determining  what 
was  fair  compensation  for  the  railroad  we  had  to  consider  the 
watered  stock  as  well  as  the  actual  value  of  that  road,  and  when  the 
case  went  to  the  supreme  court  the  supreme  court  rendered  a  de- 
cision, which,  while  I  cannot  quote  it  in  its  exact  language,  was,  in 
substance,  this:  That  in  determining  what  was  a  reasonable  rate  we 
had  to  take  into  consideration  a  number  of  things  besides  the  present 
value  of  that  road,  measured  by  the  cost  of  reproduction. 

PUBLICITY  AND  RENUNCIATION  OF  MONOPOLY. 

Congress  can  provide  for  publicity,  and  that  annually  or  at 
such  other  times  as  the  corporation  shall  make  returns  of  its  busi- 
ness and  of  it*  earnings,  because,  as  hag  been  well  said,  corporations 


NO  WAR  AGAIN&T  CORPORATIONS.  151 

cannot  claim  that  they  have  a  right  or  that  it  is  necessary  to  coyer 
their  transactions  with  secrecy,  'and  when  you  provide  for  publicity, 
so  that  the  public  shall  know  just  what  there  is  in  the  corporation, 
just  what  it  is  doing  and  just  what  it  is  making,  you  will  go  an- 
other long  step  toward  the  destruction  of  the  principle  of  monopoly. 

But  I  am  not  willing  to  stop  there.  I  do  not  want  to  go  one 
step  or  two  steps.  I  want  to  go  all  the  way  and  make  the  principle 
of  monopoly  absolutely  impossible,  or  a  monopoly  absolutely  im- 
possible in  the  industry  of  this  country.  And  therefore,  as  a  third 
condition,  I  have  suggested  that  this  license  shall  not  be  granted 
until  the  corporation  shows  that  it  has  not  had  a  monopoly  and  is 
not  attempting  a  monopoly  of  any  branch  of  industry  or  any  article 
of  merchandise.  Then  provide  that  if  the  law  is  violated  the 
license  can  be  revoked.  I  do  not  believe  in  the  government  giving 
privileges  to  be  used  by  a  corporation  without  reserving  the  right 
to  withdraw  them  when  these  privileges  become  hurtful  to  the 
people. 

I  do  not  go  as  far  as  some  do  and  say  there  shall  be  no  private 
corporations,  but  I  say  this,  that  a  corporation  is  created  by  law  for 
the  public  good,  and  it  should  never  be  permitted  to  dp  a  thing  that 
is  injurious  to  the  public  good,  and  that  if  any  corporation  enjoys  any 
privileges  to-day  which  are  hurtful  to  the  public,  those  privileges 
ought  to  be  withdrawn  from  it.  In  other  words,  I  am  willing  that 
we  should  first  see  whether  we  can  preserve  the  benefits  of  the  cor- 
poration and  take  from  it  its  possibilities  for  harm.  [A  delegute-^- 
Would  you  apply  that  to  rich  individuals,  also?  Say  Rockefeller  did 
it  on  his  account.]  iMr.  Bryan — We  have  not  reached  a  point  yet 
where  an  individual  has  been  able  to  do  harm,  and  in  my  judgment 
if  we  would  abolish  those  laws  which  grant  special  privileges  and 
which  pick  out  men  to  be  favorites  of  the  government,  no  man  by 
his  own  brain  and  muscle  could  ever  earn  enough  money  to  be 

harmful  to  the  people. 

*    *    * 

My  contention  is  that  there  is  a  vicious  principle  running' 
through  the  various  policies  which  we  have  been  pursuing;  that  in 
our  taxation  we  have  been  imposing  upon  the  great  struggling  masses 
the  burdens  of  government,  while  we  have  been  voting  the  privileges 
to  the  people  who  will  not  pay  their  share  of  the  expenses  of  the 
government.  I  have  claimed  that  when  we  collected  our  taxes  we 
were  making  the  poor  people  pay  not  only  their  own  share,  but  the 
share  of  men  whom  they  have  no  chance  to  meet  at  the  summer 
resorts. 

Every  unjust  tax  is  an  indirect  form  of  larceny.  There  are 
some  people  who  have  visible  property,  others  who  have  invisible 
property,  and  the  visible  property  is  always  taxed.  The  invisible 
property  has  too  often  escaped,  and  as  the  result  the  people  owning 
visible  property  have  paid  not  only  their  own  taxes  but  the  taxes 
that  should  have  been  paid  by  the  owners  of  invisible  property,  and 
I  have  advocated  an  income  tax  because  I  have  believed  it  the  most 
just  tax.  I  don't  mention  it  to  argue  the  subject  here,  because  I 
want  to  avoid  the  discussion  of  questions  that  might  be  in  the 
nature  of  partisan  or  political  capital.  But  if  this  government  will 


152  TRUSTS  OR  COMPETITION t 

go  out  of  the  business  of  picking  out  favorites  and  follow  the  doc- 
trine of  equal  rights  to  all  and  special  privileges  to  no  man  I  have 
no  fear  that  any  man  by  his  own  brain  and  his  own  muscle  will  be 
able  to  secure  a  fortune  so  great  as  to  be  a  menace  to  the  welfare  of 
his  fellow  men. 

[A  voice:  "What  about  the  multimillionaires?  What  if  they 
should  get  control  of  all  our  industries?"]  Mr.  Bryan — First,  1 
would  see  if  they  die  soon  enough  to  relieve  us  of  danger,  and 
if  they  didn't  I .  would  see  what  was  necessary  to  protect  society 
from  them! 

NATURAL  MEN  AMONG  ARTIFICIAL  GIANTS. 

Every  trust  rests  upon  a  corporation.  At  least  that  rule  is  so 
nearly  universal  that  I  think  we  can  accept  it  as  a  basis  for  our 
deliberation.  And  this  brings  me  to  what  I  regard  a  very  im- 
portant branch  of  this  subject.  When  God  made  man  as  the  climax 
of  creation,  He  looked  upon  His  work  and  said  it  was  good,  and 
yet  when  God  got  through  the  tallest  man  was  not  much  taller 
than  the  shortest,  and  the  strongest  man  was  not  much  stronger 
than  the  weaker.  That  was  God's  plan.  We  looked  upon  His  work 
and  said  it  was  not  quite  as  good  as  it  might  be,  and  so  we  made  a 
fictitious  man  that  is  in  some  instances  a  hundred  times — a  thousand 
times — a  million  times — stronger  than  God  made  man.  Then  we 
started  this  man-made  giant  out  among  the  God-made  pygmies. 
Now  when  God  made  man  he  placed  a  limit  to  his  existence,  so  that 
if  he  were  a  bad  man  he  could  not  do  harm  long,  but  when  we 
made  our  man-made  man  we  raised  the  limit  on  his  age.  When  God 
made  man  He  breathed  into  him  a  soul  and  warned  him  that  in  the 
next  world  he  would  be  held  accountable  for  the  deeds  done  in  the 
flesh,  but  when  we  made  our  man-made  man  we  did  not  give  him 
a  soul,  and  if  he  can  avoid  punishment  in  this  world  he  need  not 
worry  about  the  hereafter. 

My  contention  is  that  the  law  that  created  must  retain  control, 
and  that  the  man-made  man  must  be  admonished  every  day  of  his 
life:  "Remember  now  thy  Creator  in  the  days  of  thy  youth."  We 
are  not  dealing  with  the  natural  man;  we  are  not  dealing  with 
natural  rights.  We  are  dealing  with  the  man-made  man  and  arti- 
ficial privileges  and  so-called  rights.  What  government  gives  the 
government  can  take  away.  What  the  government  creates  it  can 
control,  and  I  insist  that  both  the  state  government  and  the  federal 
government  must  protect  the  God-made  man  from  the  man-made 
man. 

CONFIDENT  OF  A  RIGHT  SOLUTION. 

I  have  faith  that  these  questions  will  be  settled,  and  settled 
right,  but  I  want  to  protest  against  this  doctrine  that  the  trust  is 
a  natural  outgrowth  of  natural  laws.  It  is  not  true.  The  trust 
is  the  natural  outgrowth  of  unnatural  conditions  created  by  man- 
made  laws.  There  are  some  who  would  defend  everything,  good  or 
bad,  on  the  ground  that  it  is  a  part  of  destiny  and  you  cannot  in- 


GOVERNMENT  BY  SYNDICATE.  153 

quire  into  it.  The  fact  that  it  is,  proves  that  it  is  right;  the  fact  that 
it  is,  proves  that  it  has  come  to  stay,  and  the  most  potent  argument 
that  was  ever  made  in  defense  of  a  vicious  system  was  not  that 
it  was  right,  and  ought  to  stay,  but  that  it  has  come  to  stay, 
whether  you  like  it  or  not.  I  say  that  is  the  most  potent  argument 
that  has  ever  been  advanced  in  behalf  of  an  error — it  is  here,  it  has 
come  to  stay,  what  are  you  going  to  do  about  it? 

I  believe  that  in  a  civilized  society  the  question  is  not  what  is, 
but  what  ought  to  be,  and  that  every  proposition  must  be  arraigned 
at  the  bar  of  reason.  If  you  can  prove  that  a  thing  is  good,  let  it 
stay,  but  if  you  cannot  prove  that  it  is  good,  you  cannot 
hide  behind  the  doctrine  that  it  is  here  and  you  cannot 
get  rid  of  it.  I  believe  the  American  people  can  get  rid 
of  anything  they  don't  want  and  that  they  ought  to  get  rid  of 
everything  that  is  not  good.  I  believe  the  duty  of  every  citizen  is 
to  give  to  his  countryman  the  results  of  his  conscience  and  his 
judgment  and  cast  his  influence,  be  it  small  or  great,  upon  the  right 
side  of  every  question  that  arises,  and  that  in  the  determination  of 
questions  we  should  find  out  what  will  make  our  people  great  and 
good  and  strong,  more  than  what  will  make  them  rich. 

MONOPOLY  BREEDS  ARISTOCRACY. 

You  have  to  decide  upon  a  higher  ground,  and  if  you  were 
to  prove  to  me  that  a  monopoly  would  reduce  the  price  of  all  the 
articles  we  have  to  purchase  I  would  still  be  opposed  to  it  for  this 
reason,  which  to  my  mind  overshadows  all  pecuniary  arguments: 
Put  the  industrial  system  of  this  nation  into  the  hands  of  a  few  men 
and  let  them  determine  the  price  of  raw  material,  let  them  determine 
the  price  of  finished  products  and  the  wages  of  labor  paid,  and  you 
will  have  an  industrial  aristocracy  beside  which  a  landed  aristocracy 
would  be  an  innocent  thing,  in  my  judgment. 

I  may  be  in  error,  but  in  my  judgment  a  government  of  the 
people,  by  the  people  and  for  the  people  will  be  impossible  when  a 
few  men  control  all  the  sources  of  production  and  h.and  out  daily 
bread  to  all  the  rest  on  such  terms  as  the  few  may  prescribe.  I 
believe  this  opinion  is  the  hope  of  the  world.  I  believe  the  Declara- 
tion of  Independence  was  the  grandest  document  ever  penned  by 
human  hands.  The  truths  of  that  declaration  are  condensed  into 
four  great  propositions:  That  all  men  are  created  equal,  that  they 
are  endowed  with  inalienable  rights,  that  governments  are  instituted 
among  men  to  preserve  those  rights  and  that  governments  derive 
their  just  powers  from  the  consent  of  the  governed.  Such  a  gov- 
ernment is  impossible  under  an  industrial  aristocracy. 

GOVERNMENT   BY   SYNDICATE. 

Place  the  food  and  clothing  and  all  that  we  eat  and  wear  and 
use  into  the  hands  of  a  few  people  and  instead  of  being  a  govern- 
ment by  the  people  it  will  be  a  government  of  the  syndicates,  by  the 
syndicates  and  for  the  syndicates.  Establish  such  a  government  and 
the  people  will  soon  be  powerless  to  secure  a  legislative  remedy  for 


154  TRUSTS  OR  COMPETITION* 

any  abuse.  Establish  such  a  system  and  the  night  before  election 
the  workman  will  be  notified  not  to  come  back  the  day  after  election 
unless  the  policy  of  the  trusts'  candidate  is  successful.  Establish 
such  a  government  and  instead  of  giving  the  right  of  suffrage  to  the 
people  you  virtually  give  the  right  of  suffrage  to  the  heads  of  mo- 
nopolies, with  each  man  empowered  to  vote  as  many  times  as  he  has 
employes.  I  am  not  willing  to  place  the  laboring  men  of  this  country 
absolutely  at  the  mercy  of  the  heads  of  monopolies.  I  am  not  will- 
ing to  place  the  men  who  produce  the  raw  material  absolutely 
into  the  hands  of  the  monopolies,  because,  when  you  con- 
trol the  price  that  a  man  is  to  receive  for  what  he  produced  you  con- 
trol the  price  that  he  is  to  receive  for  the  labor  in  the  production  of 
that  thing. 

THE  FARMER  AND  THE  TRUSTS. 

The  farmer  has  no  wages,  except  as  the  wages  are  measured 
by  the  price  of  his  product,  and  when  you  place  it  in  the  power  of  the 
trust  to  fix  the  price  of  what  the  farmer  sells,  you  place  it  in  the 
power  of  the  trust  to  lower  the  wages  the  farmer  receives  for  his 
work;  and  when  you  place  it  in  the  power  of  the  trust  to  raise  the 
price  of  what  he  buys,  you  do  the  farmer  a  double  injury,  because 
he  burns  the  candle  at  both  ends,  and  suffers  when  he  sells  and 
again  when  he  buys  of  the  trust. 

Some  people  have  tried  to  separate  the  laboring  man  who  works 
in  the  factory  from  the  laboring  man  who  works  on  the  farm.  I 
want  to  warn  the  laboring  men  in  the  factories  that  they  cannot 
separate  themselves  from  those  who  toil  on  the  farm  without  in- 
viting their  own  destruction.  I  warn  the  laboring  men  in  the  facto- 
ries that  when  they  join  with  the  monopolies  to  crush  the  farmer,  as 
soon  as  the  farmer  is  crushed  the  laboring  man  will  be  crushed,  and 
his  ally  will  be  destroyed,  and  in  a  test  of  endurance  the  farmer  wifl 
stand  it  longer  than  the  laboring  man.  I  come  from  an  agricultural 
state — one  of  the  great  agricultural  states  of  this  nation — and  I 
want  to  say  to  you  that  while  our  people  are,  I  believe,  a  unit 
against  the  trusts,  we  can  stand  the  trusts  longer  than  the  laboring 
men;  we  can  stand  all  the  vicious  policies  of  government  longer  than 
the  laboring  man  can. 

The  farmer  was  the  first  man  on  the  scene  when  civilization 
began  and  he  will  be  the  last  to  disappear. 

But,  my  friends,  why  should  we  try  to  see  who  could  hold  out 
the  longest  in  suffering?  Why  try  to  see  who  can  endure  the  most 
hardships  and  yet  live?  Why  not  try  to  see  who  can  contribute 
most  to  the  greatness  and  to  the  glory  and  to  the  prosperity  of  this 
nation?  Why,  those  who  can  contribute  most  should  make  this 
government  what  the  fathers  intended  it  to  be.  For  100  years  this 
nation  has  been  the  light  of  the  world.  For  100  years  the  best  of 
all  nations  have  looked  to  this  nation  for  hope  and  instruction.  Let 
us  settle  these  great  questions  that  we  have;  let  us  teach  the 
world  the  blessing  of  a  government  that  comes  from  the  people, 
and  let  us  show  them  how  happy  and  how  prosperous  people  can  be. 

I  believe  the  doctrine  that  God  made  all  men  of  the  same  dust 
and  did  not  make  some  to  crawl  on  bands  and  knees  and  others  to 


HON.  WM.  DUDLEY  FOULKE.  156 

ride  upon  their  backs.  We  recognize  that  man  has  his  rights  and 
can  defend  them;  and  he  must  also  respect  the  rights  of  others.  Let 
us  show  what  can  be  done  when  we  put  into  actual  practice  those 
great  doctrines  of  human  equality  and  of  equal  rights  and  make  this 
government  what  the  fathers  intended,  so  that  we  shall  lead  the 
world  step  by  step  onto  higher  ground. 


HON.  WM.  DUDLEY   FOULKE. 

The  question  we  are  called  to  consider  dwarfs  in  importance 
all  other  issues  now  before  the  country  or  the  world.  When 
Dreyfus  shall  have  been  forgotten,  wben  the  war  in  the  Philip- 
pines shall  be  regarded  only  as  one  of  the  episodes  of  history, 
when  men  shall  speak  no  longer  of  the  tariff  or  the  currency, 
the  present  era  may  well  be  remembered  by  coming  generations 
as  the  epoch  of  that  great  organic  change  when  the  system  of 
competition  began  to  give  way  to  the  system  of  co-operation — 
a  change  leading  inevitably  (whether  for  good  or  ill  we  cannot 
clearly  see)  to  the  radical  reconstruction  of  the  world's  industrial 
and  social  life. 

The  organizers  of  the  trusts,  in  their  eagerness  to  put  a  stop 
to  wasteful  and  ruinous  competition,  have  been  rushing  in  head- 
long haste  to  realize  the  immediate,  personal  benefits  of  in- 
creased economy  and  power  offered  by  these  great  unions,  with 
little  regard  to  ultimate  consequences.  Their  thought  has  been, 
"After  us  the  deluge." 

On  the  other  hand,  those  who  have  been  thrown  out  of  em- 
ployment or  ruined  by  the  suppression  of  competition,  together 
with  that  vast  conservative  element  in  our  population  which 
fears  a  leap  into  the  dark,  are  lifting  their  voices  in  warning,  and 
some,  it  may  be  added,  in  rather  indiscriminate  abuse. 

Political  and  Social  Effects.— But  the  political  and  social 
effects  of  monopoly  are  far  more  menacing  to  society  than  its 
economic  results.  The  great  consolidations  of  capital  are  fast 
seizing  the  avenues  of  power  that  lead  to  the  control  of  the 
Government  and  are  seeking  to  rule  the  states  and  the  nation  it- 
self, often  through  procured  legislatures  and  corrupted  officials. 
Yet  the  monopolies  are  here.  A  great  part  of  our  manufacturing 
industries  and  a  considerable  fraction  of  our  commercial  business 
is  already  in  their  hands.  When  the  Sugar  Trust  controlled  98 
per  cent  of  the  production  of  the  country  it  was  idle  to  say  that 
the  remaining  two  per  cent  could  offer  any  substantial  compe- 
tition. And  the  present  tendency  is  for  all  these  great  organiza- 
tions to  draw  closer  and  closer  to  the  ideal  of  a  perfect  monopoly, 


156  TRUSTS  OR  COMPETITION? 

though  none  of  them  have  yet  entirely  reached  it.  If  this  present 
tendency  remains  unchecked,  it  is  easy  to  see  that  each  of  the 
important  branches  of  manufacture  will  be  controlled  by  a  single 
company.  And  the  people  naturally  look  forward  with  alarm  to 
the  time  when  in  each  branch  of  industry  a  single  monopoly 
shall  control  the  trade. 

Nay,  the  combining  and  recombining  will  not  stop  even  here. 
A  single  company  is  likely  to  control  many  branches  of  industry. 

The  department  store  already  absorbs  nearly  all  the  branches 
of  retail  trade.  The  great  anthracite  coal  fields  are  practically 
under  the  control  of  two  or  three  railway  companies,  and  it  is 
impossible  to  say  that  even  the  wheat  fields  of  the  Northwest,  or 
the  cotton  fields  of  the  South  may  not  in  the  future  share  the 
same  fate.  The  railroads,  indeed,  have  undertaken  many 
branches  of  industry  as  feeders  for  their  great  lines.  The  sum- 
mer hotel  business  seems  to  be  passing  largely  into  their  hands 
as  well  as  much  of  the  grain  elevator  business,  shipping,  and 
other  agencies  of  transportation.  Who  can  say,  indeed,  what 
branch  of  industry  may  not  be  the  feeder  for  a  railway? 

As  the  great  nations  of  the  globe  are  becoming  fewer  and 
fewer,  until  now  there  are  four  or  five  at  most,  which  control  the 
future  destinies  of  mankind,  so  the  tendency  of  industrial  organi- 
zations to  aggregate  is  such  that  I  can  see  in  fancy  four  or  five 
great  companies  which  shall  control  practically  the  whole  output 
of  the  country. 

A  Socialistic  Possibility.— Nay,  since  all  industries  are  now 
indissolubly  united,  who  can  say  (if  the  present  movement  should 
go  on  unchecked)  that  a  single  gigantic  organization  may  not 
sometime  control  all  production.  This  will  be  a  form  of  social- 
ism and  yet  it  may  not  be  at  all  the  socialism  which  fancy  pic- 
tures in  the  dreams  of  the  disinherited. 

Socialism  may  take  many  forms.  The  industrial  organization 
of  society  may  be  for  a  time  separated  from  its  political  organi- 
zation, but  not  permanently.  Socialism  does  not  necessarily 
mean  equal  shares  to  all  in  the  joint  property,  or  returns.  These 
may  be  divided  according  to  the  services  rendered  or  capital  con- 
tributed either  by  the  actual  stockholders  or  their  predecessors 
in  title,  just  as  private  property  to-day  consists  of  that  which  a 
man  earns  and  acquires  as  well  as  that  which  has  come  to  him 
by  gift  or  inheritance.  It  is,  however,  clear  that  the  mass  of  the 
people  must  have  a  sufficient  interest  in  the  co-operative  com- 
monwealth to  give  the  structure  a  broad  base  and  prevent  its 
toppling  over.  That  it  should  remain  in  possession  and  control 
of  only  a  few  millionaires  would  not  long  be  tolerated.  And  yet 
equality  might  be  found  as  impossible  in  a  co-operative  state  as 


HON.  SOURKE  COCERAN.  157 

under  the  competitive  system.  So  long  as  men  are  unequal  in 
skill,  industry  and  ability,  the  greatest  prizes  will  always  be 
won  by  comparatively  few. 

The  numerous  laws  which  have  already  been  enacted  to 
break  up  trade  agreements,  pools,  and  technical  trusts,  have 
been  ineffective.  They  have  resulted  in  the  organization  of  larger 
corporations,  which  are  more  permanent  and  more  dangerous 
in  their  character,  than  the  things  which  are  prohibited  by 
statute.  If  it  were  possible  to  break  up  these  corporations, 
which  may  well  be  doubted,  the  men  who  compose  them  would 
unite,  perhaps,  in  partnerships  or  other  forms  of  union  to  ac- 
complish the  same  objects.  If  you  break  up  these  there  are  in- 
finite varieties  of  organization  which  will  take  their  place. 
The  tendency  of  men  to  associate  for  the  accomplishment  of  a 
common  purpose  is  like  the  law  of  gravitation,  and  no  statute 
will  be  found  effective  against  such  a  tendency. . 

The  present  consolidating  tendency  of  our  industrial  life 
is  largely  beyond  our  control.  We  can  guide  it  only  a  little  way 
upon  its  journey,  for  the  most  part  we  shall  have  to  stand  aloof 
whether  we  will  or  no,  and  see  the  salvation  of  the  Lord.  And 
if  better  things  develop  than  we  dream,  it  will  not  be  the  first 
instance  in  the  evolution  of  our  race  where  good  has  been  the 
final  outcome  of  apparent  evil,  and  where  the  agencies  which 
seemed  to  portend  disaster  and  ruin,  have  been  in  the  end 
the  ministers  of  prosperity  and  happiness. 


BOTJRKE  COCKRAN. 

The  speech  by  Hon.  Bourke  Cockran  before  the  conference 
was  admirable  as  oratory,  and  contained  much  valuable  mate- 
rial concerning  the  relations  of  labor  to  capital  and  other  allied 
subjects,  but  it  was  only  to  a  very  slight  extent  a  discussion  of 
the  trust  question.  For  this  reason,  and  because  of  its  extreme 
length,  it  is  not  reproduced  here.  Those  portions  which  bore 
directly  upon  the  theme  of  the  occasion  may  be  thus  summarized, 
without  omitting  any  material  part  of  Mr.  Cockran's  thought: 

The  modern  trust,  in  so  far  as  it  is  characterized  by  monopoly, 
is  an  example  of  the  survival  of  the  fittest  in  trade — an  example 
of  legitimate  victory  for  the  winner  in  the  great  competition 
which  was  open  to  all.  Where  many  compete  one  must  prevail, 
and  the  so-called  trust  thus  stands  for  industrial  predominance 
through  excellence.  There  can  be  no  harm  from  that  form  of 
monopoly  which  results  from  one  competitor  excelling  all  others. 


158  TRUSTS  OR  COMPETITIONf 

That  excellence  is  itself  proof  that  the  one  excelling  is  render- 
ing to  society  a  better  service  than  any  rival  was  able  to  render. 
So  long  as  the  excellence  continues  the  trust  manifesting  it  will 
survive.  When  that  excellence  ceases  or  materially  abates,  com- 
petition will  spring  up  and  the  trust  will  be  simply  one  of  many 
corporations,  with  no  element  of  monopoly.  The  same  law  ap- 
plies in  trade  as  in  professional  life.  One  physician  or  lawyer 
may  through  ability  and  proficiency  in  his  profession  secure 
a  practical  monopoly  of  the  best  practice.  This  is  his  legitimate 
reward  for  excellence  in  the  competitive  race:  As  no  one  pro- 
poses or  believes  it  just  that  the  proficient  lawyer  or  doctor 
should  be  handicapped  or  held  back  in  order  to  give  opportunity 
for  the  lawyers  or  doctors  of  less  ability  or  energy,  so  in  indus- 
try and  trade  it  would  be  unjust  and  inexpedient  to  the  la^t 
degree  to  hold  back  the  successful  competitor  in  the  interest  of 
the  unsuccessful.  If  it  can  be  shown  that  any  trust  enjoys  mo- 
nopoly through  any  other  cause  than  its  own  competitive  power, 
its  industrial  excellence,  let  that  cause  be  removed.  If  the  tariff 
or  railroad  discriminations  furnish  the  occasion,  let  this  wrong 
be  corrected,  but  do  not  make  war  upon  that  industrial  excel- 
lence which  enables  one  large  corporation,  called1  the  trust,  to 
surpass  all  others.  We  cannot  afford  to  refuse  the  prize  to  him 
who  wins  it  in  open  competition,  and  the  trust  is  simply  com- 
petition at  the  end  of  the  race. 

COMMENT. 

The  other  view  would  be  this:  Nobody  is  complaining  of  mo- 
nopoly resulting  from  industrial  excellence.  Not  one  typical 
trust  owes  its  monopolistic  position  and  advantage  to  such  a 
cause.  All  have  achieved  their  predominance  through  capitalistic 
combination  and  absorption — a  thoroughly  unscientific,  uneco- 
nomic and,  as  many  contend,  unlawful  process.  It  is  the  differ- 
ence between  true  sportsmanship  and  pot-hunting. 


GOVERNOR  PINGREB  OF  MICHIGAN. 

In  all  that  has  been  said  about  truets  scarce  a  word  has  been 
spoken  or  written  from  the  standpoint  of  their  effect  upon  society. 
The  almighty  dollar  seems  to  be  the  standard  for  measuring  all 
things.  Everybody  has  been  asking  whether  more  money  can  be 
made  by  trusts  than  by  small  corporations  and  individuals;  whether 
cost  of  production  will  be  increased  or  decreased;  whether  investors 
will  be  benefited  or  injured;  whether  the  financial  system  of  the 
country  will  be  endangered;  whether  we  can  better  compete  for  the 


ATTORNEY-GENERAL  CROW.  159 

world's  trade  with  large  combinations  or  trusts;  whether  prices  will 
be  raised  or  lowered;  whether  men  will  be  thrown  out  of  employ- 
ment; whether  wages  will  be  higher  or  lower;  whether  stricter 
economy  can  be  enforced,  and  so  on.  I  believe  that  all  these  things 
are  minor  considerations.  I  think  it  is  of  far  greater  importance  to 
inquire  whether  the  control  of  the  world's  trade,  or  any  of  the  other 
commercial  advantages  claimed  for  the  trusts,  are  worth  the  price 
we  pay  for  them.  The  strength  of  our  republic  has  always  been  in 
what  is  called  our  middle  class.  This  is  made  up  of  manufacturers, 
jobbers,  middlemen,  retail  and  wholesale  merchants,  commercial 
travelers  and  business  men  generally.  It  would  be  little  short  of 
calamity  to  encourage  any  industrial  development  that  would  affect 
unfavorably  this  important  class  of  our  citizens.  Close  to  them, 
as  a  strong  element  of  our  people,  are  the  skilled  mechanics  and 
artisans.  They  are  the  sinew  and  strength  of  the  nation.  I  favor 
complete  and  prompt  annihilation  of  the  trust — with  due  regard  for 
property  rights,  of  course.  I  care  more  for  the  independence  and 
manliness  of  the  American  citizen  than  for  all  the  gold  or  silver  in 
the  world.  It  is  better  to  cherish  the  happiness  of  the  American 
home  than  to  control  the  commerce  of  the  globe.  The  degrading 
process  of  the  trust  means  much  to  the  future  of  a  republic  founded 
upon  democratic  principles.  A  democratic  republic  cannot  survive 
the  disappearance  of  a  democratic  population. 

T.  B.  Walker,  Minneapolis. — It  has  been  proposed  to  me  several 
times  to  organize  a  lumber  and  timber  trust.  A  trust  that  can 
handle  and  control  the  supply  of  raw  material  has  a  better  chance 
for  permanency  than  one  where  the  supply  of  raw  material  can  be 
produced  by  competing  producers  to  an  unlimited  extent.  It  was 
urged  upon  me  that  the  pine  timber  of  Minnesota  and  northwestern 
Wisconsin  might  be  put  into  a  deal  where  the  lumber  prices  could 
be  controlled  to  such  an  extent  that  the  trust  could  afford  to  pay 
the  timber  owners  a  large  price  for  their  timber,  mills  and  lumber 
stock  and  very  readily  add  enough  to  the  lumber  price  to  cover  the 
excessive  purchase  price,  and  to  make  dividends  on  the  enormous 
amount  of  stock  that  would  thus  be  issued.  It  was  the  general 
proposition  to  pay  us  as  timber  owners  a  large  sum  of  money,  if 
wanted,  and  a  large  block  of  stock,  and  it  was  intimated  that  a  por- 
tion of  the  promoter's  share  would  also  be  paid  over  to  us!  The  only 
possible  object  in  proposing  to  form  this  trust  was  to  put  so  much 
of  the  timber  together  that  the  prices  could  be  controlled  and  main- 
tained at  a  high  figure.  If  it  had  been  shown  to  these  promoters  and 
investors  that  prices  could  not  be  controlled  by  means  of  the  control 
of  the  supply  and  the  limitation  of  the  output,  they  would  not  have 
considered  the  deal  for  a  moment  at  even  much  lower  figures  than 
they  had  proposed  to  pay.  A  similar  effort  was  made  to  draw  the 
Minneapolis  flouring  mills  into  a  trust,  but  with  like  failure. 

Hon.  E.  C.  Crow,  Attorney-General  of  Missouri.— It  has  been 
assumed  that  there  is  in  the  country  a  large  element  opposed  to 
corporate  organization  and  corporate  wealth.  On  behalf  of  myself 
and  the  people  of  my  state  I  wish  to  say  that  no  such  antagonism 
exists.  But  this  trust  question  is  a  two-sided  one.  It  will  not  do 
for  the  opponents  of  the  trust  to  say  that  all  trusts  are  evil  and 
that  no  beneficent  results  flow  from  them.  That  proposition  cannot 


160  TRUSTS  OR  COMPETITION? 

be  substantiated  and  should  not  be  assumed.  I  believe  that  upon 
reflection  all  will  concede  this  proposition  to  be  true:  That  very 
frequently  the  trust  puts  the  product  into  the  hands  of  the  con- 
sumer at  a  lower  price  than  formerly  was  paid  for  it,  but  that  is  not 
the  gist  of  the  proposition.  The  question  is,  shall  the  power  be 
given  to  the  organized  corporate  trusts  of  this  country  to  fix  and 
determine  prices  at  their  own  sweet  will  and  pleasure  and  not  have 
prices  regulated  by  the  natural  law  of  supply  and  demand?  Therein, 
I  believe,  lies  the  kernal  of  the  proposition.  As  to  the  remedies:  I 
don't  believe  in  paternalism;  I  don't  believe  in  interfering  in  busi- 
ness affairs  any  more  than  is  necessary.  I  believe  in  the  greatest 
freedom,  but  I  believe  we  can  apply  a  remedy  that  will  act  as  a  pre- 
ventive. It  is  to  appeal  to  that  selfish  part  of  human  nature  which 
says,  we  will  protect  ourselves,  our  homes  and  our  families.  I  would 
do  it  by  enacting  for  all  of  the  United  States,  by  the  state  govern- 
ments, a  law  that  would  declare  that  any  holder  of  stock  in  a  railroad 
or  other  corporate  business  occupation  shall  be  liable  to  the  same 
extent  that  a  co-partner  is  liable.  I  would  have  these  partners  con- 
sidered in  one  state  on  the  same  basis  as  the  partners  in  any  other 
state — giving  them  equal  opportunity  and  equal  responsibility.  That 
method,  I  believe,  would  regulate  and  control  in  a  harmless  manner 
the  business  interests  of  this  country. 


GOV.  GEORGE  W.   ATKINSON. 

Gov.  Geo.  W.  Atkinson  of  West  Virginia.— If  the  advocates  of 
and  participants  in  the  trusts  could  satisfy  the  minds  of  the  masses 
upon  the  following  propositions,  they  would  then  have  but  a  limited 
opposition  in  the  years  to  come.  1.  Will  you,  and  can  you,  in  all 
cases,  as  you  claim,  agree  to  furnish  a  better  and  cheaper  article  to 
consumers  of  all  the  necessaries  of  life  covered  by  your  trusts  and 
combines?  2.  What  do  you  propose  to  do  with  the  tens  of  thousands 
of  middlemen  now  employed,  who,  of  necessity,  must  lose  their  pres- 
ent positions?  3.  What  will  become  of  the  "small  dealers"  scattered 
over  our  country  from  Maine  to  Florida,  and  from  the  surges  of  the 
Atlantic  to  the  sunset  sea?  What  are  you  going  to  do  with  the 
large  class  of  our  fellow  citizens  who  are  now  prosperous  and  happy 
in  their  present  occupations?  These  are  momentous  problems  and 
involve  momentous  results. 


The  first  step  in  solving  a  difficult  problem  is  to  become  thor- 
oughly informed  on  both  sides  of  it. 


CHAPTER  V. 
THE  QUESTION  OF  REMEDIES. 

Are  Any  Remedies  Needed?— If  So>  Shall  They  Cure  by  Regulation  or 
Removal?— Concerning  Regulation  and  Palliation— Impracticability  of 
Most  Proposed  Remedies— Twenty-one  Suggestions  from  Eminent 
Sources — Analysis  of  the  Leading  Ones— Plans  of  Mr.  Bryan  and 
Bourke  Cockran— Concerning  Remedy  by  Trust  Disintegration— Ex- 
tirpation Less  Difficult  Than  Regulation— Does  the  Common  Law 
Permit  Any  Refuge  for  Private  Monopoly?— Negative  Answer  Thus 
Far  by  the  Courts— Legal  Warrant  of  the  Trust  System. 


Any  discussion  of  remedies  necessarily  assumes 
that  something  needs  to  be  remedied;  but  obviously  the 
choice  of  remedies  will  depend  upon  the  nature  and  ex- 
tent of  the  confronting  evil.  There  being  as  yet  no  agree- 
ment on  the  latter  point,  there  is  naturally  no  general 
concurrence  as  to  what  remedies  shall  be  adopted.  The 
situation  is  not,  however,  by  any  means  chaotic  or  un- 
hopeful. The  problem  is  relatively  new,  and  a  little 
time  is  required  to  clarify  the  atmosphere.  Besides,  all 
proposed  or  possible  remedies  can  be  divided  into  two 
classes,  according  as  they  are  suited  to  one  or  the  other 
of  two  divergent  views  of  the  trust  system  and  its  evils. 
Thus  it  should  not  be  difficult  for  the  advocates  of  each 
of  these  views  to  unite  upon  a  composite  remedy  made 
up  from  their  own  list  of  remedial  possibilities. 

If  the  monopoly-trust  is  in  fact  a  natural  evolution, 
and  therefore  <(here  to  stay,"  remedies  should  be  simply 
regulative  or  palliative — somewhat  after  the  manner  of 
treatment  already  applied  to  the  factory  system,  to  pre- 

ii  161 


162  TRUSTS  OR  COMPETITION? 

vent  unnecessary  frictions  and  abuses.  If,  on  the  other 
hand,  as  many  hold,  the  trust  movement  is  an  artificial 
and  violent  subversion  of  the  historic  system  of  competi- 
tion, and  an  attempt  to  substitute  what  Professor  Clark 
terms,  a  permanent  regime  of  monopoly  not  to  be  toler- 
ated, then  the  remedies  to  be  devised  and  applied  must 
look  mainly  to  the  disintegration  of  existing  monopoly- 
trusts  and  the  prevention  of  future  ones.  But  even  in 
the  latter  case  there  is  no  apparent  reason  why  the 
friends  and  opponents  of  trusts,  if  both  are  sincere, 
should  not  agree  upon  a  temporary  code  of  regulation,  a 
sort  of  modus  vivendi,  pending  the  preparation  and  ex- 
ecution by  the  latter  of  their  more  radical  program,  if 
they  prove  able  to  carry  it  out. 

In  casting  about  for  a  remedy  for  any  complex  diffi- 
culty it  is  nearly  as  important  to  learn  what  cannot  be, 
as  what  can  be  done.  This  process  of  elimination  grad- 
ually narrows  the  field  of  search,  concentrates  atten- 
tion upon  the  uncanceled  possibilities,  and  thus  hastens 
a  successful  conclusion.  In  this  indirect  way  the  sug- 
gestion of  even  a  totally  impracticable  plan  may  con- 
tribute somewhat  to  the  final  solution. 

i. 

REMEDY    BY    REGULATION. 

As  to  regulative  measures:  From  the  mass  of  most  recent 
literature  of  the  trust  question,  we  have  gathered  the  best- 
matured  suggestions  from  nearly  as  many  different  sources,  all 
of  which  are  tersely  given  herewith.  Each  suggested  remedy 
stands  for  a  class  or  group  of  allied  possible  measures,  hence 
comment  on  each  serves  for  its  group.  Some  of  them  shade  into 
each  other,  and  in  forming  a  plan  of  trust  regulation,  several  of 
them,  if  found  satisfactory,  could  be  utilized  simultaneously 
without  conflicting.  It  will  also  occur  to  anyone  that  certain 
classes  of  the  proposed  remedies  might  be  utilized  either  for 
purposes  of  friendly  regulation,  or  for  the  purpose  of  gradually 
wearing  out  and  suppressing  or  disintegrating  an  obnoxious  trust, 
according  to  the  intent  and  wishes  of  those  who  enact  and 
those  who  enforce  the  laws. 


RElfBDT  Br  REQ9LA.TION.  163 

It  is  obvious  at  a  glance  that  no  one  has  yet  digested  any- 
thing approaching  a  definite  and  comprehensive  scheme  for 
regulating  trusts  and  preventing  or  minimizing  the  evils  which 
the  people  apprehend  from  them.  It  is  no  part  of  the  present 
purpose  to  attempt  to  formulate  from  existing  material,  or  other- 
wise, such  a  scheme.  If  needed!  that  will  come  later,  from  the 
combined  wisdom  of  all.  But  it  is  not  unfit  to  point  out  such 
elements  of  weakness  or  of  strength  in  some  of  these  numerous 
suggestions  as  force  themselves  upon  the  attention  of  a  student 
of  the  subject. 

In  any  similar  list  of  suggestions  on  any  difficult  economic 
question  a  large  proportion  would  probably  be  found  on  analysis 
to  be  wholly  impracticable,  of  very  slight  effect,  or  incredibly 
difficult  of  enforcement,  for  reasons  which  do  not  appear  on  the 
surface,  and  which  diid  not  occur  to  their  authors.  For  example, 
certain  classes  of  trust  remedies  proposed  by  those  who  are 
exclusively  business  men  will  be  found  to  be  unworkable,  be- 
cause their  authors  had  not  sufficiently  considered  the  economic 
principles  involved.  Both  experts  in  political  economy  and  men 
of  affairs  are  prone  to  advocate  measures  which  cannot  com- 
mand acceptance,  because  they  ignore  those  political  necessities 
which  lie  back  of  all  legislation,  and  which  have  a  habit  of  up- 
setting the  finest,  possible  theories.  Lawyers  and  public  men 
oftenest  err  by  reason  of  unfaimiliarity  both  with  economic  prin- 
ciples and  with  details  of  practical  business  problems,  but  on 
the  other  hand,  they  are  likely  to  be  well  informed  as  to  public 
opinion,  and  as  to  what  measures  can  be  and  what  ones  cannot 
be  enacted  and  enforced.  They  are  also  usually  open-minded 
and  quick  to  learn  what  economics  and  actual  business  require 
or  will  tolerate. 

A  large  section  of  all  such  propositions  in  the  present  in- 
stance have  slight  value  because  they  can  only  apply  to  trusts 
hereafter  to  be  formed.  We  cannot  pass  ex  post  facto,  or  retro- 
active, laws.  But  a  great  majority  of  all  our  industries  which 
can  be  consolidated  at  all  are  already  absorbed  by  trusts.  Thus, 
no  future  legislation  aimed  at  overcapitalization  and  similar  cor- 
porate vices  could  apply  to  present  trusts.  They  are  proposals  to 
secure  the  stable  door  after  the  horse  is  gone.  Another  part 
are  useless  in  practice  because  they  depend  for  their  efficacy 
upon  the  voluntary  co-operation  of  all  the  states  in  enacting  and 
enforcing  uniform  repressive  or  regulative  measures.  Such  uni- 
formity of  action  among  forty-five  states  it  is  morally  impossi- 
ble to  secure,  and  the  idea  is  not  worth  a  breath.  Even  if  the 
remaining  forty-four  states  should  agree,  which  is  in  itself  in- 
conceivable, the  concurrence  of  New  Jersey  could  not  be  ob- 
tained. That  state  has  chartered  nearly  all  the  trusts,  and  her 


164  TRUSTS  OR  COMPETITION? 

+ 

annual  revenues  from  taxation  of  trust  franchises  and  stocks 
more  than  pay  the  entire  cost  of  running  her  state  government. 
She  can  be  induced  neither  to  sacrifice  that  revenue  nor  to  im- 
pair or  modify  the  corporate  franchises  that  she  has  granted. 

Still  another  class  of  proposed  remedies  may  as  well  be 
erased  from  the  list  for  the  reason  that  their  application  involves 
radical  changes  in  the  relative  scope  of  state  and  federal  powers. 
It  is  useless  to  run  up  against  an  immovable  barrier,  and  the 
people,  north  and  south,  will  certainly  veto  any  material  enlarge- 
ment of  federal  authority  at  the  expense  of  the  dignity,  im- 
portance and  autonomy  of  the  states.  If  need  be,  they  would 
rather  suffer  some  grave  inconvenience  along  other  lines  than 
to  yield  a  point  here.  Besides,  there  is  a  widespread  suspicion 
that  to  lodge  with  Congress  unlimited  discretionary  power  over 
the  now  gigantic  capitalistic  interests  represented  by  the  trust 
system,  would  be  disastrous— to  Congress.  This  is  not  saying 
that  the  people  will  object  to  any  and  every  enlargement  of  the 
power  of  Congress,  over  interstate  commerce,  for  example,  but 
radical  changes  in  the  national  constitution  along  the  line  of 
increasing  federal  authority  in  affairs  internal  to  the  several 
states  cannot  be  expected. 

Remedies  have  no  prospect  of  adoption  which  threaten  to 
do  more  harm  than  good  by  opening  the  door  to  socialistic  as- 
saults upon  the  sacredness  of  private  ownership  of  property. 
On  this  rock  Anglo-Saxon  civilization  proposes  to  stand— for  a 
while  longer.  Suggestions  are  valueless  which  are  not  tied  to 
some  feasible  and  definite  method  of.  applying  and  enforcing 
them.  Noble  hopes  and  aspirations  fired  into  the  air  do  not 
stop  or  restrain  monopolies.  Finally,  it  is  to  be  borne  in  mind 
that  merely  regulative  measures  for  the  most  part  aim  at  one 
trust  evil  only,  namely,  the  tendency  to  oppress  the  public 
through  high  prices.  Many  believe  there  is  a  long  list  of  more 
serious  evils  besides  this,  which  cannot  be  reached  by  any 
regulative  device. 

Here  follow  in  outline  the  principal  remedial  proposals: 

TWENTY-ONE  SUGGESTIONS. 

1.  Ex-Governor  Charles  Foster  and  others:    Let  the  government 
(state  or  federal?)  levy  on  all  trust  corporations  a  special  tax  which 
shall  absorb  or  appropriate  all  net  earnings  above,  say,  six  per  cent, 
thus  removing  the  principal  inducement  for  raising  price  of  product, 
depressing  price  of.  raw   material   or  otherwise   making   exorbitant 
profits. 

2.  Attorney-General  Crow,  of  Missouri,  and  others:     Limit  the 
capital   and   purposes   of   corporations   and    make  each   shareholder 
personally  liable  as  a  partner. 


TWENTY-ONE   SUGGESTIONS.  165 

3.  Professor  George  Gunton,  Vice-President  Archbold,  of  the 
Standard  Oil  Company,  and  others:     Let  Congress  charter  corpora- 
tions which  may,  by  virtue  of  their  federal  charters,  do  business  in 
all  the  states  without  asking  the  latter's  consent. 

4.  Honorable  William  J.  Bryan  and  others:    Let  Congress  (by 
virtue  of  a  constitutional  amendment  if  this  be  necessary)  enact  that 
no  corporation  shall  do  business  outside  its  own  state,  without  first 
receiving  a  federal  license,  and  even  then  only  with  the  further  con- 
sent of  each  state  which  it  proposes  to  enter,   such  license  to  be 
granted  only  on  condition  that  the  petitioning  corporation  proves  to  a 
federal  commission  or  court,  first,  that  it  is  not  overcapitalized;  and 
second,  that  it  is  not,  and  does  not  seek  to  become  a  monopoly. 

5.  Bourke  Gockran,  Henry  Wallace,  and  others:    Compel  every 
corporation  to  make  public,  through  a  system  of  governmental  exami- 
nations and  reports  or  otherwise,  every  fact  pertaining  to  its  capitaliz- 
ation, assets,  earnings,  accounts  and  business  which  the  public  needs 
to  know  in  order  to  protect  itself  against  monopolistic  wrong. 

6.  Professor  Bemis  and  others:    Remove  or  lower  the  tariff  on 
such  goods  as  trusts  manufacture. 

7.  Professor  Richard  T.  Ely  and  others:    Prohibit  all  secret  or 
other  discrimination  in  railroad  rates,  thus  preventing  private  monop- 
olies from  being  sustained  by  natural  monopolies.     If  necessary  let 
the  nation  own  and  manage  the  railroads. 

8.  Professor  David   Kinley,  chair  of  economics,   University  of 
Illinois,    in    "Progress:"      "Remove  from  the  trusts  the  adventitious 
aids  supplied  by  natural  and  legal  monopolies,  then  potential  competi- 
tion will  be  a  sufficient  safeguard  in  connection  with  the  following 
remedial  measures:     1.    Publicity  of  accounts.     Every   corporation 
which  is  engaged  in  interstate  or  quasi-public  business,  or  is  large 
enough  to  control  an  industry,  should  be  subject  to  supervision  by  an 
auditing  commission.    2.    Stock-watering  should  be  prevented.     This 
could  be  accomplished  by  a  federal  or  state  commission  to  regulate 
or  supervise  corporations.     Capitalization  should  not  be  permitted 
beyond  the  market  value  of  the  plant.     3.    The  tariff  should  be  re- 
moved from  trust-made  goods.    4.    Our  patent     laws     should     be 
amended  so  as  to  prevent  the  suppression  of  new  discoveries  and  in- 
ventions, and  so  as  to  afford  the  general  public  more  advantage  from 
them,  and  freer  access  to  their  use  than  it  now  has." 

9.  Several   Citizens:    Let  the  public  boycott  trust-made   goods 
wherever  possible,  organizing  for  this  purpose,  and  give  their  patron- 
age and  encouragement  to  new  competitors.    Let  states  or  communi- 
ties, if  necessary,  maintain  factories  or  industries,  on  business  prin- 
ciples and  a  self-supporting  basis,  but  for  the  public  benefit. 

10.  Senator  Chauncey  M.  Depew:    Trusts  will  fall  of  their  own 
weight,  and  industrial  society  will  return  to  a  competitive  system, 
modified  by  that  legitimate  tendency  toward  large-scale  production, 
which  all  recognize  as  existing. 

11.  James  B.   Dill,   corporation  lawyer,   New  York,   addressing 
the  Chicago  Trust  Conference:    "Pass  the  English  law,  which  pro- 
vides that  every  holder  of  stock  in  a  corporation,  and  every  person 
that  buys  and  owns  it,  shall  be  deemed  to  hold  that  stock  subject  to 
demand  in  full  for  cash  unless  before  the  stock  is  issued  a  declaration, 


166  TRUSTS  OR  COMPETITION? 

describing  the  actual  situation  of  the  stock  and  financial  condition  of 
the  company,  shall  have  been  filed  in  the  company's  principal  office 
and  distributed  in  every  country  where  the  company  does  business. 
Thus  the  bad  corporations  would  be  killed  for  the  reason  that  no- 
body would  buy  their  shares." 

12.  Professor  John  Bates  Clark,  chair  of  economics,  Columbia 
University:    Let  Congress,  so  authorized  by  a  constitutional  amend- 
ment, prohibit  discrimination  in  selling  prices  by  corporations,  thus 
preventing  monopoly-trusts  from  underselling  and  destroying  a  com- 
petitor in  a  local  field,  or  in  certain  lines  of  goods,  while  itself  main- 
taining prices  and  making  profits  in  the  general  field,  or  in  other 
lines  of  goods. 

13.  Professor  J.  W.  Jenks  and  others:    Let  the  law  require  that 
before  the  stocks  or  bonds  of  any  corporation  can  be  listed  on  any 
stock  exchange  it  shall  file  for  public  inspection  at  pleasure,  a  de- 
tailed statement  of  its  capitalization,  its  actual  assets  and  its  net 
earnings. 

14.  Senator  W.  E.  Chandler:   Let  the  federal  government  exer- 
cise its  full  repressive  power  through  interstate  commerce  regula- 
tions; let  state  legislatures  place  such  limitations  on  corporations  by 
limiting  their  purposes,  amount  of  capital,  etc.,  as  will  render  them 
incapable  of  acquiring  monopolistic  power. 

15.  Judge  Thompson  of  St.  Louis,  as  quoted  by  F.  W.  Cook,  in 
"The  Corporation  Problem,"  page  241:     "If  the  operation  of  natural 
laws  does  not  check  the  trust  movement,  the  remedy  is  first  to  be 
sought  outside  of  law,  outside  of  government,  by  individual  action, 
by  counter  movements  of  some  kind.     If  capital  combines  against 
labor,  labor  must  combine  against  capital.    If  manufactures  combine 
against  agriculture,  agriculture  must  combine  against  manufactures. 
If  the  common  carrier  combines  against  the  farmer,  the  manufacturer, 
the  merchant  and  the  laborer,  then  all  must  combine  against  the 
common  carrier.     Meet  combination  with  combination;  strike  with 
strike;  lockout  with  lockout;  fight  the  devil  with  fire.     Withdraw 
all  governmental  aid,  in  the  form  of  protective  tariffs  or  otherwise, 
from  combinations  which  threaten  to  suppress  competition  in  any 
trade.    .    .    .    Withdraw   corporate  franchises  from  every   corpora- 
tion which  attempts  to  suppress  competition.    ...    If  these  means 
fail,  level  against  the  individuals — not  against  the  corporations— the 
machinery  of  the  criminal  law." 

16.  Optimists  generally:    Let  the  trusts  alone.     The  universal 
and  perpetual  pressure  of  possible  competition  will  prevent  their  do- 
ing any  harm. 

17.  Pessimists    generally:    Let    the    trusts    alone.      They    are 
stronger  than  society,  stronger  than  the  government,  and  can  defeat 
any  movement  brought  against  them.    Opposition  is  a  waste  of  time. 
We  must  adjust  ourselves  to  the  new  dispensation  as  we  do  to  any 
other  inevitable  and  permanent  evil. 

18.  Secretary  of  State  John  Hay:    Let  the  Republican   party 
attend   to  the  trusts. 

19.  John  II.  McLean:    Place  in  power  a  political  party  honestly 
pledged  to  deal  conclusively  with  the  trust  system. 

20.  Springfield  Republican:    Let  all  states  adopt  the  Massachu- 


PROPOSED  REMEDIES  ANALYZED.  167 

setts  rule  of  permitting  no  corporation  to  issue  stocks  or  bonds  in 
excess  of  a  fair  and  officially  approved  valuation  of  assets. 

21.  Socialists  generally:  Let  society  or  the  government  assume 
ownership  and  management  of  all  industries,  beginning  with,  those 
monopolized  by  trusts. 

COMMENTS. 

1.  Concerning  all  proposed  remedies  which  contemplate  a  legal 
limitation  of  trust  profits,  by  means  of  a  special  tax  on  dividends  or 
otherwise,  as  suggested  by  ex-Governor  Foster  and  others,  reference 
is  made  to  the  remarks  on  this  subject  by  President  Hadley  of  Yale 
University,  given  herein  under  the  title,  "Opinions  of  Economists." 
He  shows  how  readily  such  a  tax  could  probably  be  evaded  or  de- 
feated by  the  trusts.     Also  such  a  measure,  however  enacted,  would 
probably  require  an  amendment  to  the  federal  constitution,  for  in 
one  way  or  another  the  validity  of  any  such  tax,  or  appropriation 
of  corporate   earnings,   would   be  tested   by  the   Federal    Supreme 
Court.     It  would  be  next  to  impossible,  except  as  a  last  resort?  to 
secure  such  an  amendment  because  the  people  would  fear  it  might 
be  the  entering  wedge  to  an  impairment  of  property  rights  generally. 

2.  Of  all  proposals  like  that  of  Attorney-General  Crow  of  Mis- 
souri, to  make  shareholders  in  corporations  personally  liable  as  co- 
partners, it  may  be  said:     (1)  They  could  not  affect  present  trust 
corporations;  (2)  they  imply  voluntary  co-operation  by  all  the  states, 
which  is  impossible.     So  long  as  one  state  refused,  the  whole  scheme 
would  be  futile;  (3)  they  involve  a  virtual  sacrifice  of  the  benefits  and 
advantages  of  our  great  corporate  system,  which  the  country  would 
not  listen  to.     The  wheels  of  business  would  stop  under  such  a  sys- 
tem.    Capital  could  not  be  had  for  nine-tenths  of  legitimate  under- 
takings.    No  man  or  woman  not  sharing  the  active  control  could 
afford  to  invest  a  dollar  in  a  corporation,  since  its  insolvency  might 
mean  the  ruin  of  every  shareholder. 

3.  The  suggestion  made  by  Professor  Gunton,  Mr.  Archbold  and 
others,   that    the    federal    government    charter    corporations,    which 
shall  be  thus  empowered  to  do  business  in  all  the  states,  is  wholly  im- 
practicable politically.     Congress  can  charter  such  corporations  and 
doubtless  most  existing  trusts  would  cheerfully  accept  federal  char- 
ters, since  they  would  then  have  to  deal  with  only  one  legislative 
body  instead  of  forty-five  as  now,  but  no  Congress  can  be  elected 
which   will  adopt   this   policy,   and   few    congressmen   could   be  re- 
elected  who  should  vote  in  this  direction.     It  would  virtually  turn 
over  to  the  control  of  the  federal  government  nine-tenths  of  the  do- 
mestic business  of  the  states. 

4.  Of  the  plan  of  Mr.  Bryan  for  a  system  of  federal  licenses 
for  corporations  doing  business  in  more  than  one  state:     (1)  It  would 
probably  be  rejected  by  his  own  party  on  the  ground  that  it  calls  for 
too  great  an  enlargement  of  federal  power  over  the  internal  affairs 
of  states,  for  while  such  a  license  system  would  not  admit  into  any 
state  a  corporation  obnoxious  to  its  laws,  it  could  easily  be  used  to 
exclude  from  states  corporations  which  the  latter  would  like  to  wel- 
come.   (2)  It  would  require  an  amendment  to  the  federal  constitution, 


168  TRUSTS  OR  COMPETITION? 

which  probably  could  not  be  had  for  the  first  reason  stated.  (3)  If 
adopted  and  honestly  enforced  against  the  evasive  tactics  of  trust  law- 
yers and  accountants,  it  would  be  serviceable  as  a  mild  palliative.  (4) 
Its  slight  remedial  value  would  not  alone  warrant  the  enormous  effort 
required  to  adopt  it. 

5.  Of  the  requirement  of  publicity  of  accounts,  financial  condi- 
tion, etc.,  advocated  by  Mr.  Bourke  Cockran  and  most  others:    (1) 
It  would  be  excellent  within  narrow  limits  if  adopted  and  vigorously 
executed.    (2)  As  applied  to  existing  trusts  it  would  be  mainly  service- 
able to  investors  by  giving  them  presumably  authentic  information  of 
the  financial  state  of  each  company,  and  to  possible  competitors  in 
the  same  industry  by  aiding  them  somewhat  in  getting  the  facts  re- 
quired in  order  to  decide  whether  the  actual  profits  of  business  are 
sufficient  to  justify  a  competitive  venture.  But  possible  competitors 
in  great  industries  have  their  own  sources  for  such  knowledge,  much 
more  trustworthy  than  the  enforced  and  perhaps  doctored  reports  of 
monopoly-trusts.     (3)  It  would  not  remedy  overcapitalization  or  any 
similar  corporate  vice  in  an  existing  trust.    (4)  What  authority  would 
require  and  enforce  the  proposed  publicity?     If  New  Jersey  were 
expected  to  do  so,  there  would  probably  be  a  great  disappointment. 
If  the  federal  government,  then  a  constitutional  amendment,  followed 
by  an  act  of  Congress,  is  needful. 

6.  Of  the  proposed  reduction  of  tariff  duties  on  goods  such  as 
trusts  produce,  when  it  is  demonstrable  that  the  present  duty  pro- 
motes monopoly:    (1)  This  suggestion  is  likely  to  have  strong  support 
regardless  of  party  lines.     The  dominant  Republican  party  is  not 
likely,  while  in  power,  to  permit  such  a  movement  to  go  far  enough 
to  impair  the  reasonably  protective  features  of  the  present  tariff,  but 
resistance  to  all  change  (particularly  in  cases  like  that  of  tinplate) 
would  be  likely  to  produce  some  surprising  results  politically.    (2) 
Not  enough  is  known  of  the  actual  effects  of  the  tariff  on  trust  de- 
velopment to  warrant  any  present  prediction  as  to  the  remedial  re- 
sults of  tariff  reduction.    The  findings  of  the  Industrial  Commission, 
now  prosecuting  its  investigation,  will  go  far  to  determine  this  point. 
The  indications  are  that  the  cases  are  very  few  where  the  active 
promoters  of  trust  organizations  were  perceptibly  or  consciously  in- 
fluenced by  any  thought  of  the  tariff.    It  is  to  be  borne  in  mind  that 
a  tar.iff  reduction  which  would  literally  "smash"  a  trust  would  also 
crush  the  independent  manufacturers  or  prevent  them  from  entering 
the  field. 

7.  Concerning  the  recommendation  made  by  Professor  Ely  and 
others  as  to  railroad  discriminations  and  government  ownership  and 
management  of  railroads:    (1)  The  element  of  discriminating  rail- 
road rates  is  not  by  any  means  so  flagrant  or  so  economically  im- 
portant as  when  the  Standard  Oil  Company  was  crushing  out  com- 
petitors right  and  left  by  its  aid.     (2)  But  it  is  still  serious,  mainly 
secret,  and  needs  to  be  destroyed  by  the  strong  hand.      (3)  Probably 
Professor  Ely  overestimates  the  present  economic  effect  of  this  ele- 
ment  as   a   cause   and   bulwark   of  trusts.      Certainly   many   trusts 
would  survive  and  prosper  if  all  railroad  discrimination  were  in  fact 
done  away,  as  the  Standard  Oil  and  Sugar  Trust  officials  assert  is 
already  the  case.     (4)  This  result  can  be  completely  accomplished  by 


SENATOR   CHAUNCET  M.   DEPEW.  169 

amending  and  then  properly  enforcing  the  interstate  commerce  act. 
(5)  If  this  is  done,  as  it  should  be  at  once,  the  discussion  of  govern- 
ment ownership  of  railroads  may  be  safely  postponed  for  a  while. 

8.  Of  the  suggestions  made  by   Professors  Kinley   and   Jenks: 
(1)  To  prevent  stock-watering  would  not  squeeze  the  water  out  of 
the  stocks  of  existing  trusts.     (2)  Nobody  can  legally  prevent  future 
stock-watering,  except  the  state  chartering  future  trust  corporations 
— presumably  New  Jersey,  and  she  will  not  forego  her  present  prof- 
itable industry.     The  federal  government  cannot  prevent  this  corpo- 
rate vice   without  a   constitutional   amendment,    which,    as  already 
stated,  probably  could  not  be  had  for  this  purpose.     The  stock  ex- 
changes of  the  great  cities  can,  if  they  will,  practically  prevent  stock- 
watering  by  great  corporations  in  future  by  refusing  to  list  or  deal 
in  the  shares  of  any  corporation  hereafter  organized  which  is  ma- 
terially  overcapitalized.     But  who  shall   influence  and   reform   the 
stock  exchanges?     All  leading  exchanges  now  require  the  filing  of 
a  very  full  statement  of  organization,  capitalization  and  condition  by 
every  corporation  before  listing  its  securities.       (2)  The  suggestion 
that  it  be  made  unlawful  hereafter  to  purchase  and  then  suppress  a 
patent  or  invention  is  excellent  so  far  as  it  goes,  but  it  does  not  go 
far  toward  restraining  trusts. 

9.  Of  boycotting  trust-made  goods,  whenever  possible,  and  giving 
patronage  and  encouragement  to  competitors:    (J)   Ac  an  economic 
force  this   policy   has  never  been  very  effective,   though   it   is  not 
absolutely  impossible  to  render  it  so.  The  lack  of  organization:  on 
the  part  of  the  general  public  is  the  main  reason  for  its  failure. 
Then  care  would  have  to  be  used  not  to  violate  the  laws  against  con- 
spiracy.   (2)  If  applied  there  should  be  some  adequate  guaranty  that 
the  new  competitor  will  not,  after  becoming  formidable  through  pub- 
lic favor,  sell  out  to  the  trust  for  a  good  price.    (3)  State  or  municipal 
factories  might  be  justifiable  as  a  last  resort,  but  that  is  the  begin- 
ning of  state  socialism,  for  which  the  country  is  not  yet  ready. 

10.  Of  Senator  Chauncey   M.   Depew's   suggestion  that  trusts 
will  fall  of  their  own  weight:    (1)  Very  likely  this  is  too  optimistic, 
although  forces  of  great  energy  are  in  motion  adverse  to  the  monopoly 
element  in  trusts.     If  the  present  public  hostility  proves  to  be  both 
deep-seated  and  permanent  it  is  likely  to  find  some  mode  of  making 
itself  felt,   but  not  by  awaiting  the  action  of  the  usual  forces  of 
nature.     (2)  The  tremendous  economic  advantage  which  a  monopoly- 
trust  possesses  when  once  established    tends  to  give  it  great  staying 
power.     There  is  no  instance  thus  far  where  a  trust  thoroughly  or- 
ganized as  one  corporation  has  finally  gone  to  pieces.     A  few  have 
failed  through  incompetent  management,  but  each  has  emerged  a  re- 
organized monopoly-trust. 

11.  Of  Mr.  Dill's  excellent  recommendation  that  we  enact  the 
English  law  as  to  personal  liability  on  all  stock  not  fully  paid  up  in 
fact:    What  legislature  shall  enact  the  law?    That  of  New  Jersey? 
How  many  hopeful  remedies  land  in  that  Jersey  marsh! 

12.  Of  the  leading  suggestion  made  by  Professor  J.  B.  Clark, 
that  discrimination   in   prices   by   corporations    for   the   purpose   of 
crushing  competition  shall   be  prohibited:    (1)    If   public   sentiment 
were  now  ready  to  approve  action  along  this  line,  it  would  probably 


170  TRUSTS  OR  COMPETITION? 

come  nearer  to  being  a  solution  than  any  restraining  measure  yet 
proposed.  It  would  give  to  possible  competitors  just  the  protection 
which  they  need  against  the  club  of  the  monopoly-trust.  It  would 
promote  and  produce  wholesome  competition,  and  go  far  to  prevent 
and  suppress  the  cut-throat  element  in  industrial  rivalry.  At  first 
it  would  be  difficult,  but  not  impossible,  to  enforce  it.  (2)  It  may  be 
that  thorough  public  discussion  of  this  suggestion  may  bring  favor- 
able action  sooner  than  Professor  Clark  expects.  (3)  It  would  seem 
to  have  the  merit  of  applying  to  all  trusts  present  and  future;  of 
avoiding  the  New  Jersey  barrier,  and  of  being  unobjectionable  to 
the  states,  if  they  really  want  any  effective  measure  adopted.  With 
discrimination  in  freight  charges,  and  discrimination  in  trust  prices 
to  crush  new  competition,  substantially  abolished,  many  students  of 
the  subject  besides  Professor  Clark  believe  there  would  be  not 
much  left  of  the  monopoly  problem. 

II. 
REMEDY  BY  TRUST  DISINTEGRATION. 

Those  who  intelligently  believe  that  monopoly  for  monopoly's 
sake  is  the  central  element  in  the  trust  movement,  that  that 
element  has  no  legitimate  connection  with  the  admitted  economic 
tendency  toward  large-scale  production  with  proportionally  large 
capital,  and  that  a  permanent  system  of  monopoly  in  private 
hands  ought  not  to  be  permitted,  hold:  (1)  That  remedy  by 
regulation  is  out  of  the  question,  except  as  a  temporary  ex- 
pedient; (2)  that  remedy  by  disintegration  of  the  trusts  is  right, 
practicable  and  obligatory;  that  just  as  the  only  possible  cure 
for  human  slavery  Is  a  restoration  of  human  freedom,  so  the 
only  remedy  for  industrial  bondage  is  a  return  to  industrial 
liberty;  that  as  no  sops  or  mitigations  can  render  personal  slav- 
ery tolerable  to  the  self-respecting  man,  so  no  possible  regula- 
tions or  qualifications  can  reconcile  a  self-respecting  industrial 
people  to  a  system  of  private  monopoly,  which  means  their  forci- 
ble exclusion  from  industrialism.  They  contend  that,  even  on 
the  ground  of  practicability,  in  any  such  case,  extirpation  of  an 
evil  is  far  less  difficult  than  its  effective  regulation;  that  in  a 
long  contest  over  regulative  measures  between  Intrenched,  alert 

Mr.  Foulke  has  suggested  that  if  the  corporate  form  be  rendered 
by  the  courts  untenantable  for  the  trusts,  they  may  become  partnerships 
and  thus  hold  on  to  their  monopolies,  issuing  debentures,  profit-sharing 
or  otherwise,  to  former  security  holders.  Aside  from  evident  business 
reasons  which,  would  in  practice  prohibit  such  a  course,  there  is  no 
apparent  reason  why  the  same  principle  of  law  which  would  make 
the  shareholders  and  officers  of  a  single  corporation,  which  maintains 
a  private  monopoly  or  suppresses  competition,  co-conspirators  against 
public  policy,  would  not  apply  with  like  force  to  the  members  and 
agents  of  a  partnership,  and  finally  to  an  individual  or  sole  dealer 
and  his  responsible  employes. 


REMEDY  BJ  TRUST  DISINTEGRATION.  171 

and  allied  monopolies  on  the  one  hand,  andi  an  unorganized, 
poorly  led  and  over-busy  public  on  the  other,  the  latter  is  sure 
to  fight  a  losing  battle;  that  the  results  to  be  accomplished  by 
even  the  best  attainable  system  of  mere  palliation  and  regula- 
tion are  of  so  slight  importance  and  value  when  analyzed,  added 
to  the  apathy  and  demoralization  caused  by  the  recognition  of 
the  right  of  a  monopoly  system  to  exist  at  all,  as  to  undermine 
all  popular  interest  in  its  enforcement;  that  the  obstacles  to 
such  enforcement,  under  our  dual  and  composite  system  of 
governments,  are  next  to  insuperable  and  prevent  any  satisfac- 
tory result;  that  any  possible  system  of  effective  regulation  must 
involve  a  degree  of  governmental  interference  with  the  business 
affairs  of  the  people  in  every  state  that  would  quickly  produce 
revulsion  of  sentiment  and  a  repeal  of  regulative  laws. 

They  hold,  on  the  other  hand,  that  the  policy  of  compulsory 
disintegration  obviates  nearly  all  of  the  objections  that  are 
thus  urged  against  the  half-way  measures  of  regulation;  that  it 
is  simple,  just,  direct,  immediate;  that  it  requires  no  impossible 
co-operation  by  forty-five  different-minded  common  wealths;  that 
it  probably  involves  no  change  in  the  federal  constitution,  and 
that  it  certainly  implies  no  objectionable  curtailment  of  the 
authority  and  dignity  of  the  states.  They  remind  us  that  it  does 
not  mean  a  return  to  barbarism,  medievalism,  the  hand-loom 
or  the  stagecoach;  that  it  does  not  require  even  a  partial  sacrifice 
of  the  economic  advantage  represented  by  modern  large-scale 
production,  with  corresponding  and  legitimate  concentrations  of 
capital;  that  it  does  not  mean  a  crusade  against  corporations 
or  wealth,  or  a  protest  against  a  process  of  natural  industrial 
evolution.  In  a  word,  their  contention  is  that  the  legal  expul- 
sion of  the  monopoly  element  from  the  modern  trust  will  deprive 
industry  and  society  of  nothing  of  value,  but,  on  the  contrary, 
will  liberate  both  from  an  unnatural  and  unbearable  load;  that 
when  by  the  enforcement  of  law  it  has  been  made  plain  to  the 
managers  of  any  trust  that  they  shall  no  longer  maintain  or  seek 
a  monopoly,  such  trust  will  not  necessarily  return  to  its  original 
scattered  units,  but  will  separate  into  natural  economic  groups, 
which  will  thereafter  serve  society  and  presumably  earn  divi- 
dends, under  such  a  system  of  honorable  and  sensible  competi- 
tion as  past  experience  and  the  scientific  spirit  of  the  age  shall 
evolve.  What,  in  such  case,  will  happen  to  certain  watered 
stocks,  is  not  for  the  public  to  say.  The  trust,  even  in  the  process 
of  dissolution,  needs  no  guardian. 

No  plan  has  been  devised  and  matured,  and  nobody  has 
gone  Into  print  with  catalogues  of  remedies  along  this  line,  but 
events  and  the  orderly  progress  of  social  and  legal  forces  promise 
to  be  equal  to  the  emergency.  From  sources  which  would  com- 


172. 

mand  attention,  were  names  permitted  to  be  given,  are  gathered 
and  summarized  in  untechnical  language,  the  following  sugges- 
tions: 

1.  The  spirit  of  the  common  law,  which  prevails  through- 
out the  United  States  in  the  absence  of  legislation,  is  historically 
and  immovably  opposed  to  private  monopoly.     In  twenty-nine 
states,  including  the  great  commonwealths  of  New  York,  Ohio, 
Indiana  and  Illinois,  which  the  trusts  cannot  ignore  and  live, 
the  common  law  is  effectively  reinforced  by  anti-trust  statutes 
denning  public  policy  and  arraying  it  uniformly  against  all  that 
savors  of  monopoly.     Throughout  the  entire  republic  the  power 
of  the  federal  government  is  marshaled  on  the  same  side  in  all 
matters  affecting  interstate  commerce. 

2.  American  courts,  especially  the  highest  ones,  in  state  and 
nation,  are  able,  incorruptible  and  fearless.     With  exceptions 
so  few  as  to  emphasize  the  rule,  their  attitude  is  uniformly  one 
of  intelligent,  inflexible  and  aggressive  opposition  to  monopoly. 
Whenever  and  wherever  they  have  had  an  opportunity  to  pass 
upon  the  question,  they  have  ruthlessly  stripped  off  every  dis- 
guise, brushed  aside  the  cobweb  defenses  which  legal  casuists 
had   provided,    gone  straight   to   the    fundamental   equities    in- 
volved, and  left  no  refuge  within  which  private  monopoly  could 
abide.     They  have  driven  the  monopoly-trust  from  one  retreat 
to  another,  until  now  it  is  domiciled  exclusively  in  the  single 
corporation,  its  inner  and  final  citadel,  as  it  were,  which  the 
trust  attorneys  have  advised  their  clients  is  legally  unassailable. 
This  advice  is  broadly  based  on  these  propositions:     (1)  In  the 
line   of  legitimate  business,   freedom   of  contract?    freedom   to 
buy  and  sell,  cannot  be  legally  questioned;  (2)  a  corporation  is 
one  (artificial)  person.  As  a  legal  unit  cannot  conspire  or  combine 
with  itself,  therefore,  acting  alone,  a  corporation  is  incapable 
of  violating  laws  against  conspiracy  and  combination  in  restraint 
of  trade;  (3)  a  modern  trust  is  one  corporation;  as  such  it  has 
bought  such  properties  as  it  has  chartered  and  legal  right  to 
buy,  and  from  parties  who  had  an  equal  legal  right  to  sell. 
Not  having  conspired  or  combined  with  anyone,  and  its  regular 
business   being  legitimate,   the   trust  has  offended   against   no 
law,  and  therefore  it  cannot  be  molested. 

3.  This  looks  like  a  granite  wall  of  indefinite  height.     It 
seems  likely  to  prove  a  stage  property  of  painted  cardboard. 
As  will  be  seen  elsewhere  in  this  volume,  the  St.  Louis  Court  of 
Appeals,  which  has  a  wide  repute  for  ability  and  conservatism, 
has  recently  and  unanimously  decided  that,  as  a  corporation  is 
nothing  except  as  represented  by  its  shareholders,  officers  and 
directors,  it  and  they  may  be  guilty  of  conspiring  and  combining 


UNDERLIINQ  PRINCIPLES   OF  LAW.  173 

with  and  among  themselves  to  violate  anti-trust  laws  or  the 
common-law  prohibitions  against  combinations  in  restraint  of 
trade.  This  is  not  a  new  view,  but  it  is  newly  applied  to  the 
modern  trust.  If  when  thus  applied  it  proves  to  be  good  law 
with  the  United  States  Supreme  Court,  important  results  are 
likely  to  follow. 

The  Supreme  Court  of  Illinois,  containing  some  of  the  ablest 
jurists  in  the  country,  bas  just  decided  unanimously,  in  the 
Glucose  case,  that  neither  an  Illinois  corporation,  nor  a  foreign 
corporation  doing  business  in  Illinois,  can  lawfully  abdicate  its 
chartered  functions,  and  sell  and  convey  its  property  and  busi- 
ness in  that  state  to  a  trust  corporation  under  conditions  which 
show  that  the  purpose  is  to  eliminate  competition  and  create  a 
practical  monopoly. 

4.  The  principles  of  law  underlying  these  two  decisions,  if 
applied  in  half  a  dozen  leading  states,  or  affirmed  by  the  federal 
Supreme  Court,  will,  it  is  held,  disrupt  practically  and  promptly 
nine-tenths  of  the  trusts  in  existence.    If  so,  here  is  the  begin- 
ning of  the  end.    As  fraud  vitiates  every  contract  into  which  it 
enters,  however  regular  the  form  may  be,  so  monopolistic  intent 
or  result  vitiates  every  scheme  or  business  transaction,  however 
regular  otherwise,  which  manifests  that  intent  or  leads  to  that 
result.    That  freedom  of  contract  which  is  impliedly  guaranteed 
by  the  life,  liberty  and  property  clause  of  the  federal  constitu- 
tion does  not  extend  to  nor  cover  contracts  to  buy  or  sell  property 
when  such  purchase  or  sale  evidently  forms  part  of  a  plan  to 
monopolize   an   industry.    No   monopoly-trust   can   long   survive 
which  cannot  go  into  the  courts  and  successfully   defend  the 
legality  of  the  steps  by  which  it  became  or  sought  to  become  a 
monopoly-trust.     Such  defense  is  believed  by  many  to  be  Im- 
possible.   If  impossible,  then  most  monopoly  trusts  have  no  lawful 
or  enforcible  title  to  the  plants  they  have  absorbed. 

5.  Good  law  is  good  reason.     To  plain  people  it  has  never 
seemed  reasonable  that  the  act  of  systematically   suppressing 
competition  and  of  substituting  private  monopoly  for  the  t-ake 
of  monopoly  could  be  unlawful  and  punishable  when  committed 
by  a  group  of  citizens  using  one  form  of  organization,  say  the 
original  trust  or  the  practical  corporate  partnership,   and  sud- 
denly become  lawful  and  unassailable  when  committed  by  the 
same  group  of  citizens  using  a  somewhat  different  organization, 
namely,  the  single  corporation.     In  both  cases  the  offense,  the 
offender,  the  intent  and  the  effects  upon  society  are  the  same,  yet 
the  law,  which  attacked  and  destroyed  the  former,  is  expected 
to  protect  and  foster  the  latter.    To  state  the  proposition  clearly 
Is  to  explode  it.     But  this  is  the  one  proposition  on  which  the 
modern  monopoly-trust  takes  its  stand,  and  upon  the  soundness 


174  TRW8TS  OR  COMPETITION 9 

of  which  its  safety  and  duration  depend.  As  the  legal  advisers 
of  the  trusts  were  sorely  mistaken  in  each  previous  case,  so,  it  is 
suggested,  they  are  likely  to  be  in  this  final  one.  Apparently 
they  have  not  reckoned  with  the  spirit  of  Anglo-Saxon  law. 

6.  If  private  monopoly  embodied  in  trusts  were  in  position 
to  ask  no  favors  and  demand  no  rights  from  the  law  and  from 
society,  the  case  would  be  somewhat  changed.  But  not  only 
is  every  monopoly-trust  the  creature  of  law,  not  only  must  it 
transact  business  outside  its  own  state,  by  permission  of  law,  but 
day  by  day  it  depends  upon  the  active  care  and  assistance  of  the 
law  of  the  country  and  of  the  community  for  its  safety,  its 
solvency,  its  prosperity,  its  existence— for  the  protection  of  Its 
property  and  the  enforcement  of  its  property  rights.  The  amaz- 
ing situation,  then,  is  this,  that  organized  private  monopoly 
which  is  itself  an  outlaw  by  the  ruling  of  every  court  before 
which  it  has  ever  appeared,  by  donning  the  apparel  of  a  cor- 
poration claims  the  privilege  enjoyed  by  every  law-abiding  citi- 
zen, of  calling  the  law,  the  government  and  the  people  to  its 
assistance,  even  to  the  entire  physical  and  financial  resources 
of  the  republic  if  necessary.  Just  how  long  this  interesting 
spectacle  will  be  presented  it  lies  mainly  with  the  courts  to  de- 
termine, and  it  is  only  recording  current  events  to  say  that 
they  are  showing  no  timidity  or  reluctance  in  facing  their 
responsibility. 

Professor  Clark,  of  Columbia  University,  answering  his  own 
question,  whether  or  not  we  can  expel  the  monopoly  element 
from  the  modern  industrial  trust,  says,  "If  we  must,  we  can." 
And  this  is  said  of  Lincoln:  Early  in  '61,  when  the  war  clouds 
had  gathered,  a  delegation  of  prominent  conservatives  formally 
waited  on  the  President  and  its  solemn  spokesman  presented 
twelve  different  and'  to  him  conclusive  reasons  why  a  war  of 
coercion  must  be  a  failure.  As  the  statement  proceeded,  the 
President  gazed  out  of  that  historic  southern  window,  as  though 
his  thought  was  taking  in  all  of  the  republic's  past  and  all  its 
future.  The  speaker  closed  impressively  with,  "Mr.  President, 
we  cannot  preserve  the  Union  by  force."  Without  haste,  and 
without  hesitation,  Lincoln  replied,  "My  friends,  we've  got  to." 
The  delegation  returned  to  their  homes  in  sadness,  and  history 
went  on  its  way. 


CHAPTER  VI. 
THE  COURTS  AND  THE  TRUSTS. 


A  NOTABLE  JUDICIAL  DECISION. 

A  trust  which  has  taken  the  form  of  a  single  corporation  (as  practically 
all  trusts  have  now  done)  cannot  escape  the  prohibition  and  pen- 
alties of  anti-trust  laws  on  the  plea  that,  being  a  single  entity, 
it  cannot  combine  or  conspire  with  itself  and  hence  cannot  violate 
a  law  against  combinations  in  restraint  of  trade.  Such  a  corporation 
is  necessarily  composed  of  and  controlled  by  natural  persons  and 
these  may  be  guilty  of  combining  and  conspiring  with  each  other 
and  with  the  corporation  to  violate  law. 


The  St.  Louis  (Mo.)  Court  of  Appeals  has  recently  (August, 
1899)  rendered  a  decision,  following  in  the  line  of  others  by 
both  state  and  federal  courts,  herein  cited,  which  .seems  to  go 
to  the  heart  of  the  trust  question  on  its  legal  side.  The  case 
involved  the  construction  and  application  of  the  Missouri  anti- 
trust statute,  and,  as  will  be  seen,  the  decision,  which  was 
unanimous,  broadly  covers  the  legal  proposition  stated  at  the 
head  of  this  article. 

One  section  of  the  act  of  1891,  of  that  state,  provides  that 
"any  purchaser  of  any  article  or  commodity  from  any  individual, 
company  or  corporation  transacting  business  contrary  to  any 
provision  of  the  preceding  sections  of  this  act,  shall  not  be  liable 
for  the  price  or  payment  of  such  article  or  commodity,  and  may 
plead  this  act  as  a  defense  to  any  suit  for  such  price  or  payment." 
The  court  held  in  substance,  says  the  Central  Law  Review,  that  a 
trust  cannot  cloak  its  object  under  the  form  of  a  corporation  and 
evade  the  penalties  provided  by  the  anti-trust  law.  Under  this  de- 
cision accounts  with  trusts  operating  as  corporations  in  Missouri 
are  not  collectible.  The  suit  was  by  the  National  Lead  Company 
against  the  S.  E.  Grote  Paint  Store  Company  for  balance  due 
on  account,  Tie  defense  was  that  the  plaintiff  was  a  trust 


176  TRUSTS  OR  COMPETITIONf 

formed  to  control  prices,  in  violation  of  the  provisions  of  the  anti- 
trust law.  On  a  trial  below  the  plaintiff  got  judgment.  The  Court 
of  Appeals  reverses  and  remands  the  case.  The  evidence  showed 
that  the  National  Lead  Trust  was  organized  in  1887  to  control  the 
lead  business  of  the  country.  It  continued  under  the  trust  form  of 
organization  until  1891,  at  which  time  it  had  absorbed  thirty 
companies  in  the  United  States  and  Mexico  engaged  in  the  paint 
and  lead  business. 

COMBINATION  CHANGED  TO  A  CORPORATION. 

In  1891,  following  the  enactment  in  Missouri  of  legislation 
adverse  to  trusts  it  was  organized  in  the  form  of  a  corporation 
under  the  name  of  the  National  Lead  Company. 

The  attorneys  for  the  National  Lead  Company  contended, 
in  the  trial  of  the  case,  that  the  defense  set  up  by  the  attorneys 
of  the  S.  E.  Grote  Paint  Store  Company  could  not  stand  because 
the  National  Lead  Company  was  a  corporation,  not  a  trust. 
They  argued  to  the  Court  of  Appeals  that  the  trial  court  had 
erred  in  admitting  evidence  of  the  objects  of  the  corporation— 
in  other  words,  evidence  tending  to  show  that  it  was  a  corpora- 
tion organized  to  control  prices  as  a  trust. 

It  was  also  claimed  that  the  company,  having  a  charter 
from  the  state,  could  only  be  proceeded  against  in  the  name 
of  the  state  and  not  by  an  individual. 

The  opinion  of  the  Court  of  Appeals,  written  by  Judge  Bond 
and  concurred  in  by  all  the  members  of  the  court,  is  lengthy  and 
exhaustive. 

"The  crucial  question  in  this  case,"  says  Judge  Bond,  "is 
whether  the  plaintiff  corporation,  either  in  its  organization  or 
business  operations  in  this  state,  has  offended  any  of  the  pro- 
visions of  its  law?  That  the  predecessor  of  the  plaintiff,  the 
'National  Lead  Trust,'  was  an  unlawful  combination,  both  in 
purpose  and  fact,  is  sufficiently  established  by  the  nature  of  the 
agreement  under  which  it  was  created  and  the  methods  and 
practices  resorted  to  in  furtherance  of  that  agreement.  The 
agreement  in  question  can  only  be  construed  as  a  contract  to 
suppress  competition,  fix  the  price  of  commodities,  and  limit 
their  production,  and  to  restrain  trade.  Unless  some  one  or  all 
of  these  purposes  had  been  entertained  by  the  signers  of  the  trust 
agreement,  it  would  not  have  contained  provisions  looking  to  the 
acquisition  by  the  trustees  of  the  entire  lead  business  of  the 
country  nor  would  it  have  united  in  the  accomplishment  of  that 
end  a  majority  of  the  stockholders  of  the  largest  corporations 
dealing  in  that  product.  That  it  had  these  objects  in  view  and 
practically  accomplished  them,  is  evident  from  the  fact  that  It 


THE  COURTS  AND  THE  TRUSTS.  177 

started  with  a  contract  of  eight  corporations  and  terminated 
after  having  issued  ninety  millions  of  trust  certificates,  and  after 
it  formed  a  combination  of  thirty  corporations,  constituting  a 
large  majority  of  the  lead  dealers  of  the  country  who  had  united 
themselves  together  in  the  effort  to  realize  dividends  upon  the 
aforesaid  capitalization  out  of  assets  of  less  than  one-fourth 
in  value  of  the  amount  for  which  trust  certificates  had  been 
issued.  While  the  conclusion  of  the  illegal  purpose  of  the  trust 
agreement  is  irresistible  upon  a  consideration  of  its  several  pro- 
visions and  the  manner  in  which  they  were  carried  out,  it  will 
appear  from  an  examination  of  the  cases  that  this  result  had 
been  declared  by  every  court  called  upon  to  review  that  agree- 
ment, or  others  substantially  like  it.  State  TS.  Standard  Oil 
Company,  49  Ohio  St.  137;  Distillers,  etc.  Company  vs.  The  Peo- 
ple, 156  111.  448;  Bishop  vs.  A.  Preserving  Co.,  157  111.  1.  c.  311; 
People  vs.  N.  R.  S.  R.  Company,  121  N.  Y.  582;  Unckles  vs.  Col- 
gate, 148  N.  Y.  529;  U.  S.  vs.  Freight  Assoc.,  166  U.  S.  505. 

UNLAWFUL  CHARACTER  NOT  TRANSMITTED. 

"But  the  illegality  of  the  organization  and  operation  of  the 
National  Lead  Trust  does  not  involve  the  conclusion  that  the 
purchaser  of  its  assets,  whether  a  natural  or  artificial  person, 
succeeded  also  to  the  status  of  that  illegal  combination  under 
the  laws  enacted  in  this  state  for  the  punishment  of  pools,  trusts 
and  conspiracies.  For  the  mere  purchase  by  one  of  the  assets 
which  another  has  employed  for  an  illegal  purpose  does  not  of 
itself  imply  that  they  will  be  used  by  the  purchaser  for  the 
purpose  of  effectuating  the  objects  to  which  they  had  been  de- 
voted by  the  seller.  Such  an  intent  on  the  part  of  the  purchaser, 
if  inferable,  must  be  gathered  from  proof  of  all  the  circum- 
stances characterizing  the  transaction,  as  well  as  his  subse- 
quent conduct.  As  to  these  sources  of  proof,  the  record  in  the 
case  under  review  shows  that  the  beneficial  owners  of  the  prop- 
erty were  the  subscribers  to  the  National  Lead  Trust  and  holders 
of  its  certificates,  and  that  these  same  persons  remained  the 
beneficial  owners  of  the  same  property  after  it  was  converted 
into  the  capital  of  the  plaintiff  corporation,  the  only  difference 
being  that  each  holder  of  a  trust  certificate  received  in  lieu 
thereof  shares  of  .stock  in  the  new  corporation  at  an  agreed  rate 
of  exchange,  and  the  further  fact  that  the  legal  title  to  the  prop- 
erty was  put  into  a  corporate  entity  instead  of  a  body  of  nine 
trustees  appointed  under  the  trust  agreement.  The  sale  itself 
was  titular,  rather  than  real." 

Upon  the  question  whether  the  mere  fact  of  the  plaintiff's 
corporate  charter  exempts  it  from  the  application  of  the  law  pro- 

12 


178  TRUSTS  OR  COMPETITION? 

hibiting  combinations  and  trusts,  the  court  says:  "The  first  sec- 
tion of  the  act  of  1881,  supra,  provides  that  any  corporation 
wherever  created  which  is  'organized  to  do  business  in  this  state, 
or  any  *  *  *  individual  or  other  association  of  persons  what- 
soever who  shall  create,  enter  into,  become  a  member  of  or  a 
party  to  any  pool,  trust  agreement,  combination,  confederation  or 
understanding  with  any  other  corporation,  *  *  *  individual, 
or  any  person  or  association  of  persons,  to  regulate  or  fix  the 
price  of  any  article  of  merchandise  or  commodity,  "or  in  the  same 
manner"  to  fix  or  limit  the  amount  or  quantity  of  any  article, 
commodity  or  merchandise  to  be  manufactured,  mined,  produced 
or  sold  in  this  state,  "shall  be  deemed  and  adjudged  guilty  of  a 
conspiracy  to  defraud,  and  be  subjected  to  penalties  as  provided 
in  this  act."  Can  it  be  rationally  held  that  the  legislature  had  in 
view  the  commission  of  the  criminal  offense  created  in  the  fore- 
going section  by  a  corporation  as  such,  separate  and  apart  from 
the  individuals  composing  it?  There  is  no  legal  ground  upon 
which  such  a  view  can  be  entertained." 

THE  MEN  BEHIND  A  CORPORATION  CAN  CONSPIRE  WITH  IT. 

A  corporation  can  only  act  through  its  members  or  their 
agents.  The  corporate  entity  with  which  the  law  clothes  it  for 
special  purposes  is  not  self-acting,  hence  there  was  no  thought 
of  its  action  only,  in  the  mind  of  the  framers  of  the  statute. 
The  evident  purpose  of  the  legislature  was  to  specify  certain 
acts,  which,  if  done  by  its  stockholders  or  governing  bodies, 
should  constitute  a  crime  on  the  part  of  the  corporation.  It  did 
not  contemplate  the  commission  of  an  offense  by  an  impalpable 
abstraction,  which  could  neither  think  nor  act;  but  it  intended  to 
bind  this  corporate  entity  by  the  imputed  actions  of  its  human 
agencies.  In  other  words,  the  legislature  referred  to  the  cor- 
poration in  its  true  essence  as  an  association  of  persons  without 
which  it  could  not  exist,  and  through  whom  alone  it  must  per- 
form all  its  functions  as  a  corporate  being.  Morawetz  on  Cor- 
porations, Section  227;  Taylor  on  Corporations,  Section  51;  State 
vs.  Standard  Oil  Company,  49  Ohio  St.  137;  Buffalo  Oil  Com- 
pany vs.  Standard  Oil  Company,  106  N.  Y.  669;  Boogher  vs.  Life 
Association  of  America,  75  Mp.  319.  Hence  it  must  follow  that 
if  the  stockholders  and  governing  officers  of  the  plaintiff  corpora- 
tion combined  with  each  other  to  violate  any  of  the  provisions 
of  the  section  under  review  through  the  instrumentality  of  their 
corporate  entity,  then  the  corporation  composed  by  them  was  a 
parly  to  such  illegal  combination  within  both  the  letter  and  the 
spirit  of  the  above  section  of  the  Act  of  1891.  Or  correctly  stated, 
that  a  combination  which  is  illegal  under  the  anti-trust  law  can- 


THE  ADD7STON  PIPS  COMPANY  CASE.  179 

not  be  operated  under  the  cloak  of  a  corporation,  and  by  its 
constituent  members  or  governing  bodies.  This  conclusion  is 
believed  to  be  irresistible  in  reason  and  has  received  the  un- 
wavering support  of  the  courts  and  the  text- writers.  Ford  vs. 
Milk  Shippers'  Association,  155  111.  166;  People  vs.  Gas  company, 
130  111.  275;  Distilling  company  vs.  People,  156  111.  448;  Strait 
vs.  National  Harrow  Company,  18  N.  Y.  Supp.  224;  Beach  on 
Monopolies,  Section  158;  Hirsch  on  Com.  Corp.,  p.  86;  American 
Biscuit  and  Manufacturing  Company  vs.  Klotz,  44  Fed.  Rep.  723; 
Merz  Capsule  Company  vs.  United  States  Capsule  Company,  67 
Fed.  Rep.  414.  In  the  case  of  Ford  vs.  Milk  Shippers'  Associa- 
tion, supra,  the  members  of  a  milk  trust,  subsequently  incorpor- 
ated, brought  an  action  against  a  purchaser  of  the  commodity 
sold  by  the  corporation,  who  defended  on  the  ground  that  it  was 
formed  in  furtherance  of  a  trust  scheme,  and  transacting  busi- 
ness in  contravention  of  an  anti-trust  act  substantially  the  same 
as  that  pleaded  in  defendant's  answer  in  the  present  action.  It 
was  insisted  for  the  plaintiff  that  being  a  corporation  it  could 
not  violate  the  statute,  to  which  defense  the  Supreme  Court 
of  Illinois  answered  as  follows:  "The  corporation,  as  an  entity, 
may  not  be  able  to  create  a  trust  or  combination  with  itself,  but 
its  individual  shareholders  may,  in  controlling  it.  together  with 
it,  create  such  trust  or  combination  that  will  constitute  it,  with 
them,  alike  guilty."  The  point  in  judgment  in  that  case  is  iden- 
tical with  the  issue  presented  in  the  one  before  us.  The  con- 
clusion reached  by  the  Illinois  court  is  logical,  fully  sustained 
by  the  above  and  other  authorities,  and  in  exact  accord  with 
the  views  heretofore  expressed  in  this  opinion. 


THE   LATEST   ANTI-TRUST   DECISION. 


THE  ADDYSTON  PIPE   COMPANY   CASE. 

On  December  4,  1899,  the  Supreme  Court  of  the  United  States 
unanimously  affirmed  the  decision  of  the  Circuit  Court  of  Appeals  of 
the  sixth  district  against  the  Addyston  Pipe  Company,  known  as  the 
Iron  Pipe  Trust,  Justice  Peckham  writing  the  opinion.  The  action 
was  brought  in  Tennessee  by  the  United  States  attorney  under  the 
Federal  Anti-trust  Law,  alleging  restraint  of  interstate  commerce. 
The  District  Court  decided  in  favor  of  defendants,  but  this  decision 
was  reversed  by  the  Circuit  Court  of  Appeals,  Justice  Harlan  and 
Judge  Taft  sitting.  The  Pipe  Company  appealed  to  the  Supreme 
Court.  The  defendants  in  the  case  were  six  corporations,  whose 
plants  were  situated  in.  several  different  states,  and  doing  a  general 


180  TRUSTS  OR  COMPETITION? 

business  in  the  manufacture  and  sale  of  cast-iron,  water  and  gas  pipe. 
They  entered  into  a  close  combination,  but  not  a  consolidation, 
whereby  they  agreed  to  maintain  a  uniform  schedule  of  prices,  to 
parcel  out  the  country  among  themselves,  to  refrain  from  selling 
in  each  other's  territory,  and  to  auction  off  among  themselves  the 
privilege  of  being  practically  the  sole  bidder  for  contracts  in  unal- 
lotted territory.  In  other  words,  all  competition  was  suppressed, 
and  each  member  of  the  combine  had  a  close  monopoly  within  its  own 
district. 

The  Supreme  Court  decides,  among  other  things,  that  the  agree- 
ment not  to  ship  goods  into  certain  states  is  a  direct  restraint  of  inter- 
state commerce,  and,  hence,  in  violation  of  the  federal  antitrust  law 
of  1890.  The  contention  of  the  defendants'  counsel  was  that  under 
the  federal  constitution  private  contracts  between  individuals  and 
corporations  cannot  be  questioned  or  interfered  with  by  legislatures 
or  the  courts  on  the  ground  that  they  operate  in  restraint  of  inter- 
state commerce.  The  Supreme  Court  squarely  negatives  this  argu- 
ment, and  holds  that  the  power  of  Congress  over  interstate  commerce 
and  the  maintenance  of  competitive  conditions  are  more  important 
and  necessary  than  the  freedom  of  the  citizen  to  enter  into  contracts 
of  this  nature.  The  decision  draiws  a  clear  distinction  between  com- 
binations affecting  interstate  commerce,  and  those  whose  operation 
is  confined  within  the  boundaries  of  a  single  state. 

COMMENT. 

This  decision  is  important  in  several  respects:  (1)  It  clearly 
indicates  the  attitude  and  temper  of  the  Supreme  Court  toward 
private  monopoly  not  affirmatively  authorized  by  law;  (2)  it  shows 
that  our  highest  court  is  thus  far  unanimous  in  that  attitude;  (3)  it 
settles  the  fact  that  the  power  of  Congress  to  regulate  interstate  com- 
merce applies  to  the  acts  of  individuals  and  corporations  and  not 
merely  to  the  states  and  subdivisions  thereof.  The  decision  has  only 
an  indirect  bearing  upon  the  legality  of  that  latest  form  of  the  indus- 
trial trust  which  consists  of  a  single  corporation  absorbing  an  en- 
tire industry  by  the  outright  purchase  of  all  competing  plants.  All 
other  possible  forms  of  monopoly  seem  now  to  have  been  branded  as 
unlawful  and  the  public,  including  both  the  friends  and  opponents  of 
the  trust  system,  will  await  with  much  interest  the  trial  of  a  case 
which  shall  test  the  final  question,  that  question  being  substantially 
this:  The  highest  courts  of  the  country,  federal  and  state,  having 
at  every  stage  unanimously  declared  it  to  be  unlawful  to  monopolize 
an  industry  by  any  and  every  other  conceivable  method,  because  such 
monopolizing  is  contrary  to  public  policy  and  subversive  of  the  public 
welfare,  will  the  same  courts  at  the  next  and  final  stage  declare 
it  lawful  to  monopolize  the  same  industry  simply  because  the  same 
competing  concerns,  with  the  same  intent  and  the  same  results,  com- 


TRUSTS   AND    THE   FEDERAL   LAWS.  181 

bine  through  the  process  of  purchase  and  sale  instead  of  by  agree- 
ment, co-operation  or  conspiracy?  Obviously  that  freedom  of  contract 
which  the  federal  constitution  impliedly  guarantees  to  the  citizen  is 
subject  to  construction,  interpretation  and  limitation  by  the  courts  in 
the  exercise  of  their  wide  judicial  discretion.  Are  the  courts  which 
have  rendered  the  recent  unbroken  line  of  anti-trust  decisions 
likely  or  unlikely  to  give  that  implied  guaranty  an  interpretation 
which,  in  their  already  expressed  opinion,  would  establish  a  monopoly 
system  that  is  contrary  to  public  policy  and  subversive  of  the  public 
welfare?  On  the  answer  to  this  question  would  seem  to  depend 
the  continued  existence  of  the  present  trust  system. 


TRUSTS  AND  FEDERAL  LAW. 

The  attitude  of  the  United  States  government  toward  trusts  is 
expressed  by  the  Act  of  July  2,  1890,  an  Act  "to  protect  trade  and 
commerce  against  unlawful  restraints  and  monopolies,"  which  pro- 
vides "that  every  contract  or  combination  in  the  form  of  trust  or 
otherwise  or  conspiracy  in  restraint  of  trade  or  commerce  among 
the  several  states  or  foreign  nations  is  hereby  declared  to  be  illegal." 

This  statute  was  based  upon  the  constitutional  provision  that 
Congress  should  have  authority  to  regulate  commerce  with  foreign 
nations  and  among  the  several  states.  Several  important  decisions 
of  the  Supreme  Court  defining  the  applications  of  this  statute  were 
rendered  in  the  year  1898.  In  the  meanwhile,  however,  rules  affecting 
its  construction  have  already  been  laid  down.  For  instance,  in  1894, 
it  was  decided  by  the  Supreme  Court  that  the  statute  did  not  refer 
to  transactions  within  the  boundaries  of  single  states.  The  case  in 
which  this  was  decided  was  that  of  the  United  States  vs.  E.  C.  Knight 
Company,  and  arose  from  the  monopoly  of  the  refined  sugar  manu- 
facture. It  was  urged  that  the  possession  of  this  monopoly  was  a 
violation  of  the  Act,  since  the  sugar  would  be  sold  outside  the  states 
in  which  it  was  produced.  The  court  decided,  however,  that  the 
destination  of  the  sugar  was  a  matter  of  no  importance  and  that 
legally  viewed  the  action  of  the  corporation  was  wholly  within  the 
jurisdiction  of  the  state  in  which  it  was  located.  Any  different 
interpretation  of  the  Act  would  give  Congress,  in  the  opinion  of  the 
court,  control  over  practically  all  important  business  transactions 
which  could  be  shown  to  affect  indirectly  interstate  commerce.  Any 
contracts  or  combinations  to  control  domestic  enterprise  with- 
in the  state  may  tend  indirectly  to  restrain  interstate  com- 
merce, but  the  national  government  did  not  by  this  Act 
intend  to  assume  control  over  them  to  the  exclusion  of  the 
jurisdiction  of  the  state.  The  only  things  which  this  Act  sought 
to  prohibit  were  contracts,  combinations  or  conspiracies  which  had  to 
do  with  the  final  movement  of  the  completed  product  from  the  state 
of  its  origin  to  the  state  of  its  destination.  The  Act  did  not  apply 


182  TRUSTS  OR  COMPETITION f 

to  the  production,  which  was  altogether  distinct  from  interstate 
commerce. 

The  next  important  decision  affecting  the  construction  of  the 
Act  was  that  in  the  case  of  the  Trans-Missouri  Freight  Association 
in  1897.  A  large  number  of  railroad  companies  had  made  an  agree- 
ment to  establish  and  maintain  reasonable  rates,  rules  and  regula- 
tions on  all  freight  traffic  of  the  associate  roads.  The  emphasis  waa 
laid  on  the  word  "reasonable,"  and  it  was  urged  on  behalf  of  the 
companies  that  the  kind  of  contracts,  combinations  and  conspiracies 
referred  to  in  the  law  were  only  those  which  resulted  in  an  un- 
reasonable restraint  of  trade  or  commerce.  As  to  this,  the  court 
refused  to  consider  the  character  of  the  restraining  contract  and 
held  that  the  Act  applied  to  all  contracts,  whether  reasonable  or  un- 
reasonable, that  tended  to  the  restraint  of  interstate  or  foreign  trade. 
This  was  decided  by  a  bare  majority  of  the  court. 

In  another  case,  that  of  the  Joint  Traffic  Association,  there  was 
an  agreement  among  several  railroad  companies  "to  establish  and 
maintain  reasonable  and  just  rates,  fares,  rules  and  regulations  on 
state  and  interstate  traffic."  The  same  principles  were  involved  as 
in  the  case  of  the  Trans-Missouri  Association  and  the  court  rendered 
an  adverse  decision  on  October  24,  1898.  Some  new  arguments  of 
importance  were  advanced  at  the  trial.  It  was  held  that  the  Act 
as  construed  by  the  court  in  the  case  of  the  Trans-Missouri  Associa- 
tion was  unconstitutional  on  these  grounds.  The  constitution  gave 
Congress  the  power  to  regulate  commerce,  but  this  power  was  sub- 
ject to  another  clause  providing  that  no  person  should  be  deprived 
of  liberty  without  due  process  of  law.  The  rights  which  all  per- 
sons possess  of  freedom  in  the  making  of  contracts  and  in  the  choice 
and  pursuit  of  callings  could  be  limited  by  legislation  only  in  so  far  as 
was  compatible  with  the  general  welfare  and  security  of  society.  A 
contract  of  any  kind  may  be  in  effect  a  restraint  of  trade,  but  Con- 
gress has  not  the  authority  to  prohibit  such  a  contract  merely  on  that 
ground.  The  reasonable  or  unreasonable  nature  of  such  restraint 
of  trade,  in  other  words  its  bearing  upon  the1  general  welfare  of 
society,  must  be  determined  before  it  is  prohibited  by  law.  The 
Trans-Missouri  decision,  however,  had  refused  to  take  into  account 
the  reasonable  or  unreasonable  character  of  such  transactions.  It 
seemed  to  assert  the  principle  that  Congress  by  an  arbitrary  act 
could  prohibit  contracts  which  were  in  no  wise  detrimental  to  the 
general  welfare.  Now  that  this  principle  was  admitted  there  was 
nothing  to  prevent  the  prohibition  of  a  great  variety  of  business  con- 
tracts of  perfectly  justifiable  nature.  As  illustrations  of  the  sort  of 
contracts  which  might  be  prohibited  as  in  restraint  of  trade  were 
mentioned  organizations  of  mechanics  to  limit  the  number  of  persons 
employed  in  the  industry  and  to  maintain  wages;  a  contract  of  part- 
nership as  the  incorporation  of  a  company  consisting  of  persons  pre- 
viously engaged  in  the  same  line  of  business;  the  sale  of  the  good 
will  of  a  business  with  an  agreement  not  to  enter  the  field  as  a  com- 
petitor, etc.  The  court  admitted  that  the  constitutional  rules  as 
thus  interpreted  were  correct.  Such  contracts  as  were  cited,  however, 
did  not  come  within  the  legal  definition  of  contracts,  combinations  or 
conspiracies  in  restraint  of  trade.  The  court  said  that  "the  Act  of 


CONSTRUCTION  OF  THE  FEDERAL  ANTI-TRUST  LAW.  183 

Congress  must  have  a  reasonable  construction  or  else  there  would 
scarcely  be  an  agreement  or  contract  among  business  men  that 
could  not  be  said  to  have  indirectly  or  remotely  some  bearing  upon 
interstate  commerce  as  a  possible  effect  to  restrain  it."  The  prin- 
ciple of  the  decision  rendered  in  the  Trans-Missouri  case  was  that 
only  such  contracts  or  combinations  as  were  directly  in  restraint  of 
trade  fell  within  the  provision  of  the  law.  The  law  did  not  apply 
to  those  contracts  whose  effects  were  indirectly  in  restraint  of 
trade.  This  decision  was  again  rendered  by  a  bare  majority. 

Another  important  case  decided  at  the  same  time  was  that  of  the 
Kansas  City  Live  Stock  Exchange,  which  was  said  to  be  an  illegal 
combination  in  restraint  of  commerce,  because  by  the  rules  of  the 
Exchange  the  members  were  in  some  degree  restricted  in  their 
dealings  with  outsiders,  and  because  these  rules  in  other  ways  limited 
trade  to  some  extent.  Here  the  court  decided  that  the  Anti-Trust 
Act  did  not  apply  to  any  other  trade  or  commerce  than  that  which 
exists  or  may  exist  among  the  several  states  or  with  foreign  na- 
tions; it  was  not  to  be  construed  as  applying  to  all  operations  which 
might  in  the  long  run  add  to  the  cost  of  such  foreign  or  interstate 
commercial  interchange.  Although  the  members  of  the  Kansas  City 
Live  Stock  Exchange  dealt  in  Jive  stock,  which  was  purchased  from 
or  sold  in  other  states  and  territories,  it  did  not  fall  within  the  terms 
of  the  statute  as  being  in  restraint  of  trade.  In  this  decision  the  court 
was  unanimous. 

It  is  obvious  that  some  limitation  of  the  bearing  of  the  Act  in 
practice  was  necessary,  since  otherwise  it  would  have  had  a  range 
far  beyond  that  which  was  intended.  It  was  a  difficult  thing  to  im- 
pose these  limitations  without  real  or  apparent  inconsistency.  Such 
inconsistency  becomes  conspicuous  in  a  comparison  of  the  Joint  Traf- 
fic case  or  the  Live  Stock  Exchange  case  with  the  Trans-Missouri 
case.  In  the  latter  case  the  demand  that  the  Act  should  be  con- 
strued reasonably  and  not  literally  was  rejected  and  the  court  de- 
clared that  any  contract  in  restraint  of  interstate  or  foreign  trade, 
whether  reasonable  or  not,  was  prohibited.  In  each  of  the  two  former 
cases,  however,  the  court  said  that  a  reasonable  construction  must 
be  given  to  the  Act  and  that  certain  contracts  did  not  come  within 
the  legal  definition  of  acts  in  restraint  of  trade,  and  that  the  Act  did 
not  apply  to  contracts  which  only  indirectly  tended  to  restrain  inter- 
state trade. 

To  sum  up,  the  construction  placed  by  the  court  upon  this  Act 
down  to  the  close  of  the  year  1898  has  established  the  following  prin- 
ciples: (1)  The  statute  does  not  relate  to  any  transaction  that  takes 
place  only  within  the  boundaries  of  a  single  state.  (2)  It  does  not 
relate  to  transactions  which  have  only  an  indirect  effect  in  restraint 
of  interstate  commerce.  (3)  In  determining  whether  contracts  or 
combinations  exert  a  direct  restraint  upon  interstate  commerce,  the 
Act  is  to  be  reasonably  interpreted.  (4)  That  any  transactions 
which  do  so  directly  tend  to  restrain  trade  fall,  whether  reasonable 
or  not,  under  the  prohibitions  of  the  Act.  Thus  prices  may  be  kept 
up  by  a  combination  or  producers  in  any  one  state,  even  though  the 
commodity  is  destined  for  exportation  to  another  state;  wage-earners 
may  form  combinations  to  limit  the  number  employed  in  any  par- 


184  TRUSTS  OR  COMPETITION? 

ticular  industry  or  to  maintain  wages;  persons  may  combine  to  main- 
tain  the  prices  of  goods  or  services  or  facilities  which  axe  employed 
in  interstate  commerce;  and,  in  general,  any  line  of  aclion,  whether  in 
the  long  run  restrictive  of  interstate  commerce  or  not,  is  not  within 
the  application  of  the  Act  unless  its  effect  is  directly  in  restraint  of 
that  commerce.  Thus  after  eight  years  of  application  the  Inter- 
State  Commerce  Act  has  been  found  in  practice  to  have  a  very 
limited  scope.  So  far  as  there  is  a  further  demand  for  legislation  in 
restraint  of  combinations  and  monopolies,  it  can  be  met  only  by  the 
legislative  branches  of  the  different  state  governments,  if  the  Act 
of  July  2,  1890,  continues  to  be  interpreted  as  at  present. — Inter- 
national Year-Book,  1898,  pp.  783-5. 


TRUSTS  AND  THE  PUBLIC  WELFARE. 

ATTITUDE   OF  AMERICAN  JUDICIABT  AS  MOST  RECENTLY   ILLUSTRATED   BY  THE 
UNITED  STATES  SUPREME  COURT. 

Mr.  Justice  Peckham,  in  presenting  the  majority  opinion  of 
the  United  States  Supreme  Court  in  the  well-known  case  of  the 
United  States  vs.  The  Trans-Missouri  Freight  Association,  March 
22,  1897,  expressed  these  views  on  the  general  subject  of  trusts 
and  trade  combinations  preventing  free  competition: 

"It  is  true  the  results  of  trusts  or  combinations  of  that  nature 
may  be  different  in  different  kinds  of  corporations,  and  yet  they 
all  have  an  essential  similarity  and  have  been  induced  by  motives 
of  individual  or  corporate  aggrandizement  as  against  the  public 
interest.  In  'business  or  trading  combinations  they  may  even 
temporarily,  or,  perhaps,  permanently,  reduce  the  price  of  the 
article  traded  in  or  manufactured,  by  reducing  the  expense  in- 
separable from  the  running  of  many  different  companies  for  the 
same  purpose.  Trade  or  commerce  under  those  circumstances 
may,  nevertheless,  be  badly  and  unfortunately  restrained  by  driv- 
ing out  of  business  the  small  dealers  and  worthy  men  whose  lives 
have  been  spent  therein  and  who  might  be  unable  to  readjust 
themselves  to  their  altered  surroundings.  Mere  reduction  in  the 
price  of  the  commodity  dealt  in  might  be  dearly  paid  for  by  the 
ruin  of  such  a  class  and  the  absorption  of  control  over  one  com- 
modity by  an  all  powerful  combination  of  capital.  In  any  great 
and  extended  Change  in  the  manner  or  method  of  doing  business  it 
seems  to  be  an  inevitable  necessity  that  distress  and  perhaps  ruin, 
shall  be  its  accompaniment,  in  regard  to  some  of  those  who  were 
engaged  In  the  old  methods.  A  change  from  stage  coaches  and 
canal  boats  to  railroads  threw  at  once  a  large  number  of  men 
out  of  employment.  Changes  from  hand  labor  to  that  of  maehin- 


TEMPER  OF  THE  U.  8.  SUPREME  COURT.  185 

ery,  and  from  operating  machinery  by  hand  10  the  application  of 
steam  for  such  purpose,  leave  behind  them,  for  the  time,  a 
number  of  men  who  must  seek  other  avenues  of  livelihood. 
These  are  misfortunes  which  seem  to  be  the  necessary  accom- 
paniment of  all  great  industrial  changes.  It  takes  time  to  effect 
a  readjustment  of  industrial  life  so  that  those  who  are  thrown 
out  of  their  old  employment  by  reasion  of  such  changes  as  we 
have  spoken  of  may  find  opportunities  for  labor  in  other  depart- 
ments than  those  to  which  they  have  been  accustomed.  It  is  a 
misfortune,  but  yet  in  such  cases  it  seems  to  be  the  inevitable  ac- 
companiment of  Change  and  improvement.  It  is  wholly  different, 
however,  when  such  changes  are  effected  by  combinations  of 
capital,  whose  purpose  in  combining  is  to  control  the  production 
or  manufacture  of  any  particular  article  in  the  market,  and  ly 
such  control  dictate  the  price  at  which  the  article  shall  be  sold— 
the  effect  being  to  drive  out  of  business  all  the  small  dealers  in  the 
commodity,  and  to  render  the  public  subject  to  the  decision  of  the 
combination  as  to  what  price  shall  be  paid  for  the  article.  In 
this  light  it  is  not  material  that  the  price  of  an  article  may  be 
lowered.  It  Is  in  the  power  of  the  combination  to  raise  it,  and 
the  result,  in  any  event,  is  unfortunate  for  the  country,  by  de- 
priving it  of  the  services  of  a  large  number  of  small,  but  inde- 
pendent dealers,  who  were  familiar  with  the  business,  and  wno 
had  spent  their  lives  in  it,  and  who  had  supported  themselves  and 
their  families  from  the  small  profits  realized  therein.  Whether 
they  be  able  to  find  other  avenues  to  earn  their  livelihood  is  not 
so  material,  because  it  is  not  for  the  real  prosperity  of  any  coun^ 
try  that  such  Changes  should  occur  which  result  in  transferring 
an  independent  business  man,  the  head  of  his  establishment,  small 
though  it  might  be,  into  a  servant  or  agent  of  a  corporation  for 
selling  the  commodities  which  he  once  manufactured  or  dealt  in- 
having  no  voice  in  shaping  the  business  policy  of  the  company  and 
bound  to  obey  orders  issued  by  others.  Nor  is  it  for  the  substan- 
tial interests  of  the  country  that  any  one  commodity  should  be 
within  the  sole  power  and  subject  to  the  sole  will  of  one  powerful 
combination  of  capital.  Congress  has,  so  far  as  its  jurisdiction 
extends,  prohibited  all  contracts  or  combinations  in  the  form  of 
trusts  entered  into  for  the  purpose  of  restraining  trade  and 
commerce.  The  results  naturally  flowing  from  a  trade  or  com- 
bination in  restraint  of  trade  or  commerce  when  entered  into  by 
a  manufacturing  or  trading  company,  such  as  above  stated, 
while  differing  somewhat  from  those  which  may  follow  a  contract 
to  keep  up  transportation  rates  by  railroads  are,  nevertheless,  of 
the  same  nature  and  kind,  and  the  contracts  themselves  do  not 
so  far  differ  in  their  nature  that  they  may  not  all  be  treated  alike 


186  TRUSTS  OR  COMPETITION? 

and  be  condemned  in  common.  It  is  entirely  appropriate,  gener- 
ally, to  subject  corporations  or  persons  engaged  in  trading  or 
manufacturing  to  different  rules  from  those  applicable  to  rail- 
roads in  their  transportation  business,  but  when  the  evil  to  be 
remedied  is  similar  in  both  kinds  of  corporations,  such  as  con- 
tracts which  are  unquestionably  in  restraint  of  trade,  we  see  no 
reason  why  similar  rules  should  not  be  promulgated  in  regard  to 
both,  and  both  be  covered  in  the  same  statute  by  general  language 
sufficiently  broad  to  include  them  both.  We  see  nothing  either  in 
contemporaneous  history,  in  the  legal  situation  of  the  time  of  the 
passage  of  the  statute,  in  its  legislative  history,  or  in  any  general 
difference  in  the  nature  and  kind  of  these  trading  or  manufactur- 
ing companies  from  railroad  companies,  which  would  lead  us  to 
the  conclusion  that  it  cannot  be  supposed  the  legislature,  in  pro- 
hibiting the  making  of  contracts  in  restraint  of  trade,  intended  to 
include  railroads  within  the  purview  of  that  act." 


THE  ILLINOIS  GLUCOSE  CASE. 

The  first  important  case  to  be  determined  by  the  highest  court 
of  any  state,  bearing  directly  upon  the  legality  of  that  latest  form 
of  industrial  trust,  the  single  corporation,  was  decided  on 
October  19,  1899,  by  the  Supreme  Court  of  Illinois  in  a  unani- 
mous, elaborate  and  forcible  opinion.  The  case  wasi  that  of 
George  F.  Harding  and  others  against  the  American  Glucose 
Company.  The  facts  as  brought  out  at  the  trial  and  summarized 
in  the  opinion  written  by  Justice  Magruder  are  briefly  these: 

The  business  of  producing  glucose  can  only  be  carrier!  on 
successfully  in  what  is  known  as  the  "corn  belt"  of  the  United 
States.  The  industry  is  represented  at  present  by  six  large 
factories,  mainly  situated  in  Illinois  and  Iowa,  all  of  which  were, 
until  1897,  independent  and  competing  concerns.  One  of  these 
was  the  establishment  at  Peoria,  Illinois,  owned  by  the  Ameri- 
can Glucose  Company,  a  corporation  of  the  State  of  New  Jersey. 
In  August,  1897,  the  Glucose  Sugar  Refining  Company  of  New 
Jersey  was  organized  with  a  stock  capital  of  $40,000,000  for  the 
purpose  of  consolidating  these  six  factories,  that  is,  the  entire 
glucose  industry,  into  a  single  ownership  or  trust.  The  consent 
was  obtained  of  the  holders  of  a  majority  of  the  stock  of  each  of 
the  local  companies,  including  the  American  of  Peoria.  Under  the 
laws  of  New  Jersey  all  the  property  and  business  of  a  corporation 
may  be  legally  sold  and  conveyed  by  the  directors  with  the  con- 
sent of  two-thirds  in  interest  of  the  stockholders,  while  in  most 


THE  ILLINOIS  GLUCOSE  CASE.  187 

of  the  States,  including  Illinois,  this  is  not  the  case,  and  any 
minority  stockholder  has.  a  right  to  make  legal  protest  against 
such  action,  except  when  the  corporation  for  legitimate  reasons 
is  going  into  liquidation  and  retiring  from  business.  Conveyance 
of  the  plant  and  business  of  the  American  Glucose  Company  was 
executed  and  delivered  to  the  newly  formed  trust  in  1897,  where- 
upon Harding  and  other  dissenting  stockholders  of  the  American 
Company  brought  the  suit  just  decided  to  invalidate  and  prohibit, 
such  sale  and  conveyance  on  the  ground  that  they  were  illegal 
(1)  because  the  consent  of  the  minority  stockholders  was  neces- 
sary and  was  not  obtained,  and  (2)  because  such  attempted  sale 
and  conveyance  constituted  part  of  a  combination  and  conspiracy 
to  form  a  trust  and  monopoly  contrary  to  public  policy  and  in 
violation  of  the  anti-trust  statute  of  Illinois.  It  was  alleged  by 
the  plaintiffs  that  such  trust  had  been  organized  under  the  laws 
01  New  Jersey  for  the  purpose  of  regulating  and  fixing  the  orice 
of  glucose  and  grape  sugar,  controlling  the  output,  closing  several 
of  the  factories,  eliminating  competition  and  thus  creating  an 
unlawful  monopoly  in  the  glucose  industry.  It  was  further  al- 
leged and  proven  that  the  outgoing  companies  had  bound  them- 
selves not  to  engage  in  the  manufacture  of  glucose  within  a  radius 
of  1,500  miles  of  Chicago,  and  as  this  covered  the  entire  corn 
belt,  it  was  in  fact  a  contract  in  entire  restraint  of  trade.  The 
alleged  facts  as  to  the  formation  of  the  trust  were  admitted 
by  the  defendants  to  be  true,  but  they  relied  mainly  on  the  con- 
tention that  as  Harding  and  his  co-plaintiffs  were  stockholders  in 
a  New  Jersey  corporation  they  were  bound  by  New  Jersey  laws 
and  therefore  had  no  standing  in  an  Illinois  court.  The  lower 
court  had  ruled  against  the  plaintiffs  on  this  point.  The  Supreme 
Court  rules  for  the  plaintiffs  on  practically  every  point;  reverses 
the  decree  of  the  court  below,  with  directions  to  enter  a  decree 
setting  aside  all  deeds,  assignments,  contracts  and  other  instru- 
ments constituting  or  accompanying  the  attempted  conveyance 
and  delivery  of  the  Peoria  plant  and  business  of  the  American 
Glucose  Company  to  the  trust  known  as  the  Glucose  Sugar  Re- 
fining Company,  and  "to  grant  such  other  and  further  relief 
as  is  consistent  with  the  prayer  of  the  bill  and  as  is  sustained  by 
the  evidence  already  on  record." 

The  defense  claimed  that  because  the  American  Glucose  Com- 
pany was  organized  in  New  Jersey  a  bill  in  the  Illinois  court 
wouid  not  lie.  Regarding  this  proposition  the  court  says  when- 
ever a  foreign  corporation  comes  into  Illinois  to  do  business 
it  Is  subject  to  all  the  liabilities,  restrictions  and  duties  that  are 
or  may  be  imposed  on  corporations  of  like  character  organized 
unaer  the  general  laws  of  the  state,  and  shall  have  no  other  or 
greater  power,  It  says  it  is  a  settled  doctrin9  of  this  state,  estab- 


188  TRUSTS  OR  COMPETITION? 

lished  by  many  decisions  of  the  court,  that  foreigni  corporations 
do  not  come  into  this  state  as  a  matter  of  legal  right,  but  only 
by  comity.  "Foreign  corporations,"  it  says,  "cannot  be  permitted 
to  come  into  this  state  for  the  purpose  of  asserting  rights  in 
contravention  of  our  law." 

The  preponderance  of  opinion  among  leading  and  disinterested 
lawyers,  who  have  publicly  expressed  their  views,  is  that  this 
decision  constitutes  a  distinct  and  very  important  step  in  the 
solution  of  the  trust  question.  They  consider  its  significance 
to  be  two-fold  in  that,  (1)  it  brands  with  illegality  as  against 
public  policy,  and  in  this  case  also  as  violative  of  the  Illinois 
anti-trust  statute  the  present  form  of  trust  whereby  a  single 
large  corporation,  formed  for  the  purpose,  buys  up  all  or  nearly 
all  the  plants  of  an  industry  for  the  purpose,  or  with  the  result, 
of  suppressing  competition  and  thereby  creating  a  virtual  mo- 
nopoly. Hitherto  this  final  form  of  trust  has  been  considered  by 
those  interested  in  the  trust  system  as  legally  unassailable.  t.2) 
The  decision  indicates  with  apparent  certainty  the  attitude  of  the 
judicial  mind  generally  toward  these  modern  monopoly  organi- 
zations. In  this  double  view,  it  is  held,  the  importance  of  the 
decision  can  scarcely  be  overestimated.  The  pronouncements  of 
the  court  are  so  fundamental,  sweeping  and  emphatic  as  to  leave 
no  doubt  as  to  what  its  course  would  be  in  any  other  or  future 
case  involving  the  question  of  the  inherent  and  necessary  illegality 
of  any  trust  organized  upon  the  lines  of  the  Glucose  Sugar  Re- 
fining Company.  In  the  course  of  the  opinion  the  Court  uses 
this  language: 

"A  question  of  law  which  arises  in  the  case  is  whether  the 
facts  set  up  in  the  bill  constitute  an  illegal  trust.  The  public 
policy  of  the  State  of  Illinois  has  always  been  against  trusts 
and  combinations  organized  for  the  purpose  of  suppressing  com- 
petition and  creating  monopoly.  It  makes  no  difference  that  the 
agreement  for  the  illegal  combination  is  not  a  formal  written 
agreement.  It  may  be  a  verbal  agreement  or  understanding  or 
a  scheme  not  embodied1  in  writing,  but  evidenced  by  the  action 
of  the  parties.  If  the  transactions  referred  to  in  the  bill  in 
this  case  did  not  amount  to  an  absolute  agreement  made  in  ad- 
vance between  the  six  corporations  they  at  least  constituted  a 
scheme  understood  by  all  the  corporations  and  participated  in 
by  them  all.  The  carrying  out  of  the  scheme  would  necessarily 
result  in  suppressing  competition  in  the  manufacture  of  glucose 
and  in  the  creation  of  a  monopoly  in  that  business." 

The  leading  journals  of  Chicago  attach  the  greatest  Im- 
portance to  the  decision.  The  "Times-Herald"  editorially  says: 

"The  unanimous  decision  of  the  Illinois  Supreme  Court  in  the 
Glucose  Trust  case  is  of  the  highest  significance.  It  answers,  so  far 


IMPRESSION  MADE  BY  THE  GLUCOSE  DECISION.       189 

as  this  state  is  concerned,  a  question  of  the  greatest  moment  and 
practical  importance.  It  deals  with  the  latest,  newest  form  of  com* 
bination — a  form  which  many  have  supposed  to  be  beyond  danger 
of  successful  legal  attack.  The  kind  of  cembination  which  the  Su- 
preme Court  of  Illinois  now  pronounces  as  unlawful  and  injurious 
to  the  public  welfare  as  were  the  kinds  previously  attempted  was 
held  legitimate  and  proper  in  a  New  Jersey  decision  rendered  a  few 
months  ago.  It  is  safe  to  say,  however,  that  the  tribunals  of  other 
states  will  follow  the  law  of  Illinois  as  now  laid  down  and  inter- 
preted rather  than  the  law  of  New  Jersey.  *  *  *  The  striking 
feature  of  the  case  is  the  emphatic  declaration  that  the  'new'  form 
of  combination,  based  on  the  alleged  right  to  buy  and  sell  corporate 
assets,  is  unlawful  in  Illinois." 

The  serious  view  taken  of  the  decision  in  financial  centers 
is  indicated  by  the  following  extracts  from  an  editorial  in  "The 
Outlook"  for  November  4: 

"The  decision  of  the  Supreme  Court  of  Illinois  in  the  Glucose 
case  shows  that  combinations  of  competing  factories  may  often  be 
prevented  as  easily  as  combinations  of  competing  banks.*  *  *  As 
Illinois  forms  a  large  part  of  the  "corn  belt,"  in  which  alone  glucose 
can  be  successfully  manufactured,  and  as  the  decision  declares  null 
and  void  the  transfer  by  sale  of  any  Illinois  factory  to  the  National 
combination,  the  blow  administered  to  the  trust  is  of  far-reaching  im- 
portance. *  *  *  The  decision  of  the  Illinois  court  seems  to  pre- 
clude the  establishment  of  a  monopoly  for  some  time  to  come. 
The  magnitude  of  the  victory  for  anti-trust  legislation  is  so  great 
that  friends  as  well  as  foes  hesitate  in  estimating  its  effects  until 
they  learn  whether  it  is  to  be  followed  by  other  decisions  requiring 
the  release  of  the  property  of  similar  trusts  to  the  corporations  and 
firms  originally  controlling  them." 

President  C.  H.  Matthiessen  of  the  Glucose  Trust  (the  Glucose 
Sugar  Refining  Company)  says  in  an  interview: 

"There  has  been  such  confusion  in  the  public  mind  about  the 
decision  and  its  effect  on  this  company  that  a  word  or  two  is  not 
out  of  place.  If  the  final  court  of  review  stands  by  the  opinion  just 
delivered,  this  company  will  cheerfully  conform  its  course  along  the 
lines  which  the  highest  court  shall  direct.  Courts  do  not  destroy 
property  and  where  the  court  holds  that  certain  methods  are  con- 
trary to  statute,  it  has  been;  and  I  believe  will  always  be,  that  the 
parties  in  interest  are  permitted  to  conform  to  the  court's  require- 
ments without  sacrificing  or  destroying  corporate  property  or  stock- 
holders' interests.  If  finally  the  decision  in  the  Harding  case  stands, 
the  proper  steps  to  protect  the  interests  of  the  company  and  its 
stockholders  can  and  will  be  promptly  and  decisively  taken." 


190  TRUSTS  OR  COMPETITION  f 

CONCERT  WITHOUT  COMPACT  UPHELD. 

The  following  memorandum  of  a  very  recent  and  leading  case 
(Post  et  al.  vs.  Southern  Railway  Company,  Supreme  Court  of 
Tennessee,  April  Term,  1899;  opinion  filed  May  27,  1899)  has  especial 
significance  for  the  conservative  attitude  taken  by  the  highest  court  of 
a  state,  whose  legislature  has  enacted  one  of  the  most  severe  of  anti- 
trust laws,  for  the  respectful  frankness  of  its  comment  on  the  opinions 
of  the  United  States  Supreme  Court  in  the  notable  Trans-Missouri  and 
Traffic  Association  railroad  cases  herein  cited,  and  for  the  well- 
reasoned  approval  it  gives  to  the  suggestions  of  the  latter  tribunal  to 
the  effect  that  excessive  competition  may  be  lawfully  and  honorably 
avoided  and  trusts  dispensed  with  by  concert  of  action  without  com- 
pact among  competitors. 

The  main  point  at  issue  in  this  case  was  the  claimed  right  of  a 
shipper  of  through  freight  at  through  rates  to  designate  the  particular 
route  of  such  shipment  beyond  the  line  of  the  initial  or  receiving  car- 
rier. While  deciding  adversely  to  such  claim,  the  court  had  occasion 
to  pass  upon  the  following  collateral  question: 

A  Conference  of  Competitors.— It  was  claimed  by  the  complaining 
shippers  that  at  a  meeting  of  railway  and  packet  company  representa- 
tives, participated  in  by  the  Southern  Railway  Company  and  held  in 
New  Orleans  prior  to  the  bringing  of  this  suit,  an  agreement  to  fix 
and  maintain  transportation  rates  was  entered  into  of  a  naturp  vio- 
lative  of  the  act  of  Congress  of  July  2,  1890,  commonly  known  as  the 
Sherman  Anti-trust  Law,  and  injurious  to  the  complainants  as  ship- 
pers. The  court  said:  "It  appears  that  prominent  representatives  of 
all  the  leading  lines  of  railroad  entering  Memphis,  and  of  one  packet 
line,  attended  this  meeting  at  New  Orleans,  which  was  formally 
held  with  a  chairman  and  secretary.  It  is  said  on  one  hand  that  a 
binding  contract  was  entered  into  between  the  several  parties  to  do 
several  things  and  pursue  certain  policies;  while,  on  the  other  hand, 
it  is  said  there  was  no  binding  contract  that  could  be  legally  enforced 
entered  into,  but  that  the  several  individuals  for  their  companies 
outlined  the  course  his  company  would  pursue." 

The  opinion  then  quotes  the  minutes  of  the  proceedings  of  the 
meeting,  from  which  it  appears  that,  presumably  after  a  general  oral 
interchange  of  views,  each  representative  of  a  separate  transportation 
line  successively  announced  the  course  which  his  company  would 
pursue  concerning  the  shipment  of  export  cotton  out  of  Memphis,  the 
common  competing  point  for  all  the  lines.  Among  other  details  each 
announced  that  his  company  would  not  "cut  unlawfully  or  secretly 
reduce,  in  any  way  whatever,  its  published  tariff  rates  on  cotton  from 
Memphis  destined  to  points  within  the  United  States  and  Canada;" 
also  that  each~would  "control  the  route  of  its  cotton  from  Memphis  to 
foreign  ports."  When  all  had  been  heard  it  proved  that. each  had 
made  the  same  announcement  as  all  the  others.  A  supplementary 
announcement  was  made  by  each  representative  in  like  manner  to  the 
effect  that  his  company  "would  limit  its  carrying  of  the  cotton  from 
and  passing  through  Memphis  from  September  1,  1898.  to  August 
31,  1899,  to— per  cent." 

The  several  percentages  or  proportions  thus  separately  announced 


CONCERT  WITHOUT  COMPACT.          191 

aggregated  100  per  cent,  or  the  whole  of  such  traffic.  No  penalty  or 
forfeiture  of  auy  nature  was  mentioned  or  implied,  but  each  an- 
nouncement contained  the  item  that  the  company  making  it  "will 
give  ten  dajrs'  notice  in  advance  of  any  change  in  its  policy."  Sub- 
sequently the  vice-president  of  the  Missouri  Pacific  Railway,  which 
was  not  represented  at  the  meeting,  made  a  similar  announcement 
for  his  road. 

First  calling  attention  to  the  fact  that  even  if  the  action  in 
New  Orleans  was  obnoxious  to  the  Federal  anti-trust  statute,  remedial 
proceedings  could  only  be  brought  by  the  United  States  through 
the  proper  United  States  District  Attorney  on  the  authority  of  the 
United  States  Attorney-General,  the  court  proceeded  ot  express  its 
opinion  of  the  action  at  that  meeting.  Changing  slightly  the  order 
of  paragraphs,  the  language  of  the  opinion  is  in  part  as  follows: 
"We  are  of  the  opinion  the  action  taken  in  New  Orleans  was  not  in 
violation  of  the  provisions  of  the  act  of  July  2,  1890,  known  as  the 
Sherman  Anti-trust  Law.  *  *  *  It  is  sufficient  to  say  that  we  do 
not  find  from  the  record  that  the  proceedings  at  New  Orleans  took 
the  shape  of  an  actual  contract,  capable  of  legal  enforcement  by 
either  party,  but  it  was  a  simultaneous  declaration  of  the  same 
policy  which  had  already  been  practiced  by  each  company,  and 
this  declaration  by  each  was  made  in  and  for  the  consideration  of 
the  fact  that  rates  had  already  been  fixed  by  the  keenest  competition. 
*  *  *  We  think  the  maintenance  of  uniform,  reasonable  rates  a 
matter  of  the  highest  importance  to  both  shippers  and  carriers,  and 
on  the  other  hand  the  prevention  of  cut  rates  and  discrimination  is 
equally  important  to  both.  The  carrier  is  worthy  of  his  hire,  that 
is,  to  receive  reasonable  compensation  for  his  services  and  risk. 
While  the  shipper  is  entitled,  in  the  first  place,  to  reasonable  rates 
for  the  service  rendered  him,  and  in  the  next  place,  to  have  the  same 
rates,  no  more,  no  less,  than  other  shippers,  so,  the  shipper  is  not 
entitled  to  receive,  nor  the  carrier  to  give,  directly  or  indirectly, 
rebates  and  concessions  to  some  which  are  not  given  to  others." 

After  quoting  with  satisfaction  the  utterance  of  the  United 
States  Supreme  Court  in  the  Joint  Traffic  Association  case  as  to  the 
propriety  of  harmonious  action  with  reasonable  rates,  by  com- 
petitors, without  contract,  the  court  says:  "In  order  to  obtain 
relief  in  courts  of  equity,  it  must  appear,  not  simply  that  there  is 
a  concert  of  action  [among  natural  competitors],  but  that  its  direct 
and  immediate  effect  is  to  restrain  commerce  and  trade,  and  not  merely 
that  it  may  be  hereafter  used  for  that  purpose  by  a  departure  from 
its  present  purposes  and  practices,  and  there  need  be  some  special 
ground  for  equitable  interference.  *  *  *  Now,  if  it  had  been 
made  to  appear  that  in  consequence  and  as  a  result  of  this  declaration 
or  agreement  [at  the  New  Orleans  meeting]  rates  had  advanced,  or 
any  injury  had  resulted,  or  any  shipper  had  been  prejudiced,  or  that 
such  was  the  purpose  of  the  declaration  or  its  direct  and  immediate 
result,  it  would  have  been  clearly  illegal,  and  an  attempt  to 
execute  and  enforce  it  could  by  a  proper  proceeding  have  been  pre- 
vented, but  if  the  declaration  was  simply  an  expression  of  a  right 
which  the  carriers  had  without  such  declaration,  and  not  made  for  an 
illegal  purpose,  and  did  not  operate  prejudicially  to  shippers,  such 
declaration  would  not  be  unlawful." 


192  TRUSTS  OR  COMPETITION f 

SUPREME  COURT  OF  MICHIGAN  ON   MONOPOLIES. 

In  the  case  of  Richardson  vs.  Buhl  (the  Diamond  Match  Case), 
the  Supreme  Court  of  Michigan  said: 

Monopoly  in  trade  or  in  any  kind  of  business  in  this  country  is 
odious  to  our  form  of  government.  It  is  sometimes  permitted  to  aid 
the  government  in  carrying  on  a  great  public  enterprise  or  public 
work,  under  government  control,  in  the  interest  of  the  public.  Its 
tendency  is,  however,  destructive  of  free  institutions  and  repugnant 
to  the  instincts  of  a  free  people,  and  contrary  to  the  whole  scope  and 
spirit  of  the  federal  constitution,  and  is  not  allowed  to  exist  under 
express  provisions  in  several  of  our  state  constitutions.  Indeed, 
it  is  doubtful  if  free  government  can  long  exist  in  a  country  where 
such  enormous  amounts  of  money  are  allowed  to  be  accumulated  in 
the  vaults  of  corporations  to  be  used  at  discretion  in  controlling 
the  property  and  business  of  the  country,  against  the  interest  of  the 
public  and  that  of  the  people,  for  the  personal  gain  and  aggrandize- 
ment of  a  few  individuals.  It  is  always  destructive  of  individual 
right,  and  of  that  free  competition  which  is  the  life  of  business, 
and  it  invites  and  perpetuates  one  of  the  great  injuries  which  it 
was  the  object  of  the  framers  of  our  form  of  government  to  eradi- 
cate and  prevent.  It  is  alike  destructive  to  both  individual  enter- 
prise and  individual  prosperity,  whether  conferred  upon  corporations 
or  individuals,  and,  therefore,  public  policy  is  and  ought  to  be,  as 
well  as  public  sentiment,  against  it.  All  combinations  among  per- 
sons or  corporations  for  the  purpose  of  raising  or  controlling  the 
prices  of  merchandise,  or  of  any  of  the  necessaries  of  life,  are 
monopolies  and  intolerable,  and  ought  to  receive  the  condemnation 
of  all  courts. 

ILLEGALITY  OF  THE  SINGLE  CORPORATION  TRUST. 

Charles  Fisk  Beach,  Sr.,  in  his  Standard  Work,  "Monopolies 
and  Industrial  Trusts"  (1898),  says,  under  the  head  of  Trust  Com- 
binations: 

The  decisions  and  legislation  adverse  to  the  "trust"  proper  have 
led  to  a  variety  of  combinations  which  are  of  the  nature  of  a  trust, 
but  are  designed  to  conform  to  the  requirements  of  the  law.  The 
design  of  these  combinations  is  to  secure  the  ends  answered  by  the 
trust,  while  avoiding  the  methods  which  have  rendered  the  trusts 
illegal  as  in  contravention  of  public  policy  and  void.  But  the  numer- 
ous schemes  of  this  character  have  not  been  largely  successful;  as 
the  ends  sought  are  essentially  illegal,  condemnation  is  not  escaped 
by  a  change  of  methods.  These  combinations  appear  under  a 
variety  of  forms.  But  whatever  phase  they  may  assume,  the  object 
is  to  suppress  competition,  or  to  regulate  the  production  and  sale 
of  some  article  of  necessity  or  of  some  commodity  that  is  in  general 
use. 

LABOR  COMBINATIONS  AND  COURTS. 

The  United  States  Supreme  Court,  in  deciding  the  Debs  case  (In 
re  Debs,  158  U.  S.  564),  said: 


COURTS  AND  LABOR  COMBINATIONS.  193 

The  right  of  any  laborer  or  of  any  number  of  laborers  to  quit  work 
was  not  challenged.  The  scope  and  purpose  of  the  bill  was  only 
to  restrain  forcible  obstructions  of  the  highways  along  which  inter- 
state commerce  traveled  and  the  mails  are  carried,  and  the  facts  set 
forth  at  length  are  only  those  facts  which  tended  to  show  that  the 
defendants  were  engaged  in  such  obstructions.  A  most  earnest  and 
eloquent  appeal  was  made  to  us  in  eulogy  of  the  heroic  spirit  of 
those  Who  threw  up  their  employment,  and  gave  up  their  means  of 
earning  a  livelihood,  not  in  defense  of  their  own  rights,  but  in  sym- 
pathy for  and  to  assist  others  whom  they  believed  to  be  wronged. 
We  yield  to  none  in  our  admiration  of  any  act  of  heroism  or  self- 
sacrifice,  but  we  may  be  permitted  to  add  that  it  is  a  lesson  which 
cannot  be  learned  too  soon  or  too  thoroughly,  that  under  this  govern- 
ment of,  and  by  the  people,  the  means  of  redress  of  all  wrongs  are 
through  the  courts  and  at  the  ballot  box,  and  that  no  wrong,  real 
or  fancied,  carries  with  it  legal  warrant  to  invite  as  a  means  of  re- 
dress the  co-operation  of  a  mob  with  its  accompanying  acts  of  vio- 
lence. 

And  the  Supreme  Court  of  Virginia,  in  deciding  the  case  Crump 
vs.  Commonwealth,  84  Va.  927,941,  said: 

It  matters  little  what  the  means  adopted  by  combinations  formed 
to  intimidate  employers  or  to  coerce  other  journeymen  if  the  design 
or  the  effect  of  them  is  to  interfere  with  the  rights  or  to  control  the 
free  action  of  others.  No  one  has  a  right  to  be  hedged  in  and  pro- 
tected from  competition  in  business;  but  he  has  a  right  to  be  free 
from  wanton,  malicious  and  insolent  interference,  disturbance  or 
annoyance.  Every  man  has  a  right  to  work  for  whom  he  pleases, 
and  for  any  price  he  can  obtain;  and  'he  has  a  right  to  deal  with  and 
associate  with  whom  he  chooses;  or  to  let  severely  alone,  arbitrarily 
and  contemptuously,  if  he  will,  anybody  and  everybody  upon  earth. 
But  this  freedom  or  uncontrolled  and  unchallenged  self-will  does  not 
give  or  imply  a  right,  either  by  himself  or  in-  combination  with 
others,  to  disturb,  injure  or  obstruct  another,  either  directly  or 
indirectly,  in  his  lawful  business  or  occupation,  or  in  his  peace  and 
security  of  life.  Every  attempt,  by  force,  threat,  or  intimidation, 
to  deter  or  control  an  employer  in  the  determination  of  whom  he  will 
employ  or  what  wages  he  will  payis  an  act  of  wrong  and  oppression; 
and  any  and  every  combination  for  such  a  purpose  is  an  unlawful 
conspiracy.  The  law  will  protect  the  victim  and  punish  the  movers 
of  any  such  combination.  In  law  the  offense  is  the  combination  for 
the  unlawful  purpose,  and  no  overt  act  is  necessary  to  constitute  it. 
*  *  *  A  wanton,  unprovoked  interference  by  a  combination  of 
many  with  the  business  of  another  for  the  purpose  of  constraining 
that  other  to  discharge  faithful  and  long  tried  servants,  or  to  employ 
whom  he  does  not  wish  or  will  to  employ  (an  interference  intended 
to  produce,  and  likely  to  produce,  annoyance  and  loss  to  that  busi- 
nesas)  will  be  restrained  and  punished  by  the  criminal  law  as  oppres- 
sive to  the  individual,  injurious  to  the  prosperity  of  the  community, 
and  subversive  of  the  peace  and  good  order  of  society. 


18 


CHAPTER  VII. 
THE  STANDARD  OIL  TRUST. 

Historical  Sketch  and  Defense — Origin  and  Development— Purposes  of  Its 
Founders— Methods  Pursued  and  Results  Accomplished— Discrim- 
inating Railroad  Rates — Treatment  of  Competitors — Improvement  and 
Cheapening  of  Product— Editorial  Comment— The  Marietta  Trans- 
portation Episode — Some  Conclusions. 


At  the  request  of  the  editor  Mr.  S.  C.  T.  Dodd,  solicitor  of  the 
Standard  Oil  Trust,  has  furnished  for  the  present  use  a  very  full 
historical  sketch  and  a  defense  of  that  well  advertised  concern,  a  care- 
ful synopsis  of  which  follows.  Most  of  the  material  was  used  by 
Mr.  Dodd  on  a  former  occasion  but  facts  are  added  bringing  it 
down  to  date.  It  is  believed  that  such  an  authentic  statement  from 
the  legal  representative  of  the  greatest  of  the  trusts  will  have  value. 
Where  facts  are  stated  as  such  they  are  unquestionably  trustworthy. 
Where  opinions  or  conclusions  are  given  each  reader  will  make  his 
own  allowance  for  the  naturally  favorable  bias  of  the  author.  Mr. 
Dodd  prefaces  his  sketch  with  some  general  comments  upon  the  sub- 
ject of  trade  combinations  which  are  of  interest.  For  example: 

Of  Trade  Combinations  Generally. — "Whatever  else  may  be  said 
of  combinations  of  railroads,  telegraph  lines,  and  manufacturing 
companies,  statistics  will  show  that  increased  trade  and  lower  prices 
follow  as  an  almost  inevitable  result.  I  shall  show  that  so  far  from 
the  Standard  Oil  combination  being  an  exception,  it  can  exhibit  an 
increased  trade  and  reduction  in  prices  as  a  result  of  combination  to  EJI 
almost  unprecedented  extent.*  *  *  It  is  assumed,  in  all  attacks 
upon  combinations,  that  their  purpose  and  end  is  to  reduce  supplies 
and  increase  prices  or  in  some  similar  way  to  injure  the  public.  There 
is  no  charge  made  against  combinations  which  has  so  little  founda- 
tion as  this.  It  is  the  very  reverse  of  the  truth.  Take  the  statistics 
of  any  important  business  for  the  past  twenty  years  and  it  will  be 
found  that  the  effects  of  large  combinations  have  been  to  increase 
tirade,  decrease  prices  and  to  benefit  the  public.  *  *  *  No  legist- 

194 


THE  STANDARD   OIL  TRUST.  195 

latiire  can  interfere  with  freedom  of  combination  for  legitimate  pur- 
poses without  striking  trade  and  commerce  prostrate  at  its  feet. 
The  right  of  association  must  be  free;  the  magnitude  of  association 
must  correspond  with  the  magnitude  of  the  business  to  be  done; 
business  can  no  longer  be  localized;  it  cannot  be  confined  by  state 
lines;  when  the  problem  is  to  open  and  keep  open  the  markets  of  the 
world,  it  is  sheer  madness  to  attempt  to  restrict  the  business  as 
that  of  a  local  manufacturer  may  be  restricted. 

«*  *  *  When  I  speak  of  unrestricted  combinations  I  do  not 
mean  that  combination  should  be  allowed  under  all  circumstances 
and  for  all  purposes.  While  combination  is  not  per  se  evil,  its  pur- 
pose may  be.  The  law  is  possibly  our  best  guide  on  this  subject. 
It  has  progressed  as  experience  and  the  necessities  of  business  re- 
quired, from  the  idea  that  all  combinations  were  wrong  to  the  idea 
that  all  persons  should  be  left  free  to  combine  for  all  legitimate 
purposes.  To  this  day,  however,  the  law  is  properly  very  jealous  of 
certain  classes  of  combinations,  such  as  (1)  where  the  parties  com- 
bining exercise  a  public  employment,  or  possess  exclusive  privileges, 
and  are  to  that  extent  monopolies;  (2)  where  the  purpose  and  effect 
of  the  combination  is  to  'corner'  any  article  necessary  to  the  public; 
(3)  where  the  purpose  and  effect  of  a  combination  is  to  limit  produc- 
tion and  thereby  to  unduly  enhance  prices;  these  things  are  illegal 
and  properly  so.  The  mistake  of  writers  on  trusts  and  combinations 
consists  in  assuming  that  all  combinations  are  for  such  purposes, 
whereas  the  purpose  and  effect  of  most  combinations  is  just  the  re- 
verse of  this,  namely,  to  lessen  the  cost  of  production,  increase  the 
amount  of  consumption,  and  distance  competitors  by  selling  at  lesa 
prices.  *  *  *  The  well-known  Coal  cases  and  the  Salt  cases 
were  arrangements  with  the  direct  and  avowed  purpose  of  destroy- 
ing all  competition,  diminishing  supplies  and  raising  prices.  These 
things  are  just  as  unlawful  without  combination  as  with  it.  In 
other  words,  the  evil  is  not  in  combination  but  in  its  purposes  and 
results. 

"*  *  *  In  reviewing  the  history  of  the  Standard  combination, 
I  expect  to  demonstrate  (1)  that  the  necessities  of  the  business 
demanded  association  on  a  large  scale;  (2)  that  the  business  has 
always  been  competitive  both  at  home  and  abroad;  (3)  that  the 
combination  has  constantly  cheapened  manufacture  and  improved 
the  manufactured  products;  (4)  that  it  has  increased  the  demand 
and  diminished  prices  to  an  extent  unparalleled  in  any  other  busi- 
ness; (5)  that,  in  short,  it  has  furnished  oil  at  the  lowest  possible 
prices  at  home  and  built  up  an  American  trade  of  $50,000,000  a 
year  abroad,  which,  it  maintains  against  the  fiercest  competition,," 
[from  the  Russian  oil  fields.] 

HISTORICAL   SKETCH— ORIGINAL  ALLIANCE,   1872. 

For  some  time  after  the  discovery  of  petroleum  in  1859,  the 
crude  article  was  simply  distilled,  and  the  result  was  a  product  both 
unsatisfactory  and  dangerous  in  use.  Improvements  were  gradually 
made,  several  new  products  discovered,  hundreds  of  patents  ob- 
tained and  hundreds  of  refineries  were  established  in  the  oil  region. 


196 

The  latter  were  almost  invariably  cheap  and  small.  In  the  larger 
cities  more  extensive  refineries  were  built,  with  more  expensive  and 
complete  equipments  of  machinery.  All  the  refineries  were  competi- 
tive, and  although  for  a  time  the  business  prospered,  yet  for  many 
years  the  history  of  the  refining  business  was,  for  the  most  part, 
one  of  disaster,  failure  and  bankruptcy.  Until  1872  the  price  of  oil 
was  above  25  cents  per  gallon.  At  times  it  sold  as  high  as  50  cents; 
still  refiners  on  the  whole  made  little  money.  Now  a  fair  profit  is 
made  on  oil  selling  at  7  cents  per  gallon,  and  the  quality  is  far  bet- 
ter. This  result  has  largely  been  accomplished  through  the  efforts 
of  the  Standard  Oil  Combination. 

The  Standard  Oil  Company  of  Ohio,  with  a  capital  of  $1,000,000 
was  organized  in  1870.  It  was  one  of  several  wholly  independent  cor- 
porations formed  to  engage  hi  the  relatively  new  and  undeveloped 
business.  Another  Standard  Oil  Company  had  previously  been  or- 
ganized in  Pittsbuirg,  by  other  parties,  and  was  doing  a  large  busi- 
ness. The  other  leading  independent  concerns  were  the  Cleveland 
Standard  Refinery,  The  Pittsburg  Refinery,  the  Atlantic  Refining 
Company,  of  Philadelphia,  and  Charles  Pratt  &  Company  of  New 
York.  Owing  to  the  disastrous  history  and  condition  of  the  business 
and  its  hazardous  nature,  these  companies  in  1872  entered  into  an 
alliance  and  this  alliance  formed  the  basis  of  the  subsequent  Stand- 
ard Oil  Trust.  This  combination  was  not  an  unusual  thing.  Re- 
finers' combinations,  of  greater  or  less  extent,  had  been  previously, 
formed,  but  all  were  short-lived.  The  cost  of  packages  and  trans- 
portation -had  been  an  important  factor  in  ruining  the  business. 
At  first  oil  was  barreled  at  the  wells  and  hauled  in  wagons  to  the 
railroads.  Later  on.  the  underground  pipe-line  system  was  adopted, 
but  even  up  to  1872  it  cost  50  cents  to  transport  a  barrel  of  oil  ten 
miles  by  pipe-line.  Railroad  rates  were  excessive  and  lacking  in  uni- 
formity. When  refiners  were  able  to  combine  and  throw  a  large 
volume  of  business  to  any  particular  road  they  could  get  favorable 
railroad  rates.  Those  who  could  not  do  this  got  such  rates  as  they 
could.  The  rebate  and  drawback  system  was  then  universal,  and 
was  not  confined  to  oil.  Undoubtedly  this  fact  had  much  to  do  with 
the  combination  of  refiners  above  referred  to,  and  which  came  to  be 
known  as  the  Standard.  But  it  was  by  no  means  the  only  reason. 
The  men  in  control  of  that  combination  foresaw  that  a  business 
which  had  thus  far  been  disastrous  would  require  co-operation  on 
a  large  scale  and  for  several  reasons. 

Purposes  of  its  Founders. — Without  assuming  that  they  foresaw 
clearly  all  the  results  of  their  combination,  yet  judging  from  what 
has  been  accomplished,  their  purposes  may  be  stated  thus: 

1.  To  cheapen  the  cost  of  transportation,  both  local  and  to  the 
seaboard  by  perfecting  and  extending  the  pipe-line  system;  by  con- 
structing and  supplying  cars  by  which  oil  might  be  shipped  in  bulk 
at  less  cost  than  in  packages,  and  the  cost  of  packages  be  also 
saved;  by  building  tanks  in  which  oil  could  be  stored  in  bulk;  by 
purchasing  and  perfecting  terminal  facilities  for  receiving,  handling 
and  re-shipping  oils;  by  purchasing  or  building  steam-tugs  and 
lighters  for  harbor  and  river  service;  by  building  wharves,  docks 
and  warehouses  for  foreign  shipment. 


GENESIS  OF  THE  STANDARD  TRUST.  197 

2.  To  manufacture  a  better  illumiuant  at  less  cost  by  combining 
the  knowledge,  experience  and  skill  of  all  the  parties  to  the  com- 
bination, as  well  as  their  various  secret  processes  and  their  patents, 
and  by  building  up  manufactories  on  a  more  extensive  and  perfect 
scale  with  the  latest  improvements  in  machinery  and  appliances. 
To  unite  with  the  business  of  refining,  the  collateral  business  of 
manufacturing  barrels,  tin  cans,  boxes  for  enclosing  cans,  paint, 
glue  and  sulphuric  acid,  and  to  cheapen  these  necessary  materials 
by  producing  them  on  a  large  scale  with  the  best  machinery;  to  ob- 
tain and  employ  the  best  scientific  skill  in  investigating  and  experi- 
menting upon  the  best  methods  of  obtaining  new  and  useful  prod- 
ucts from  petroleum,  and  to  cheapen  illuminating  oils  by  obtaining 
profits  from  these  by-products;  to  employ  agents  and  send  them 
throughout  the  world  to  open  up  new  markets,  learn  the  cheapest  and 
best  methods  of  supplying  them,  and  to  convince  the  people  of  all 
lands  of  the  cheapness  and  safety  of  petroleum  oils;  finally,  by  all 
these  means  to  increase  the  supply  of  oil  products  and  lessen  their 
price  to  consumers  generally. 

All  these  things  the  Standard  Combination  has  been  doing 
through  all  the  years  that  have  followed  its  organization.  To  ac- 
complish these  great  purposes  combination  was  absolutely  indis- 
pensable. No  one  man  or  corporation  could  have  accomplished  it. 
It  meant  millions  of  money.  The  pipe-line  and  storage  system  alone 
required  $30,000,000. 

FORMATION  OF  THE  STANDARD  TRUST. 

The  associated  corporations  engaged  in  refining  carried  on  the 
business  for  nine  years  without  any  further  consolidation.  It  was 
a  union,  not  of  corporations,  but  of  their  stockholders.  The  several 
companies  continued  to  conduct  their  business  as  before.  They 
ceased  to  be  competitive  with  each  other  in  the  sense  of  striving 
to  undersell  each  other.  They  continued  to  be  competitors  in  the 
sense  that  each  strove  to  show  at  the  end  of  each  year  the  best  re- 
sults in  making  the  best  products  at  the  least  cost.  From  time  to 
time  new  persons  and  additional  capital  were  taken  into  this  associa- 
tion. Whenever  and  wherever  a  man  showed  himself  skillful  and 
useful  in  any  branch  of  the  business  he  was  sought  after.  As  busi- 
ness increased  new  corporations  were  formed  in  various  states,  in 
the  same  interest,  some  as  trading  companies,  others  as  manufactur- 
ing companies. 

Then,  for  convenience  of  control  and  management  the  Standard 
Oil  Trust  was  formed.  It  was  simply  an  agreement  placing  all  of 
the  stock  of  these  various  companies  in  the  hands  of  trustees,  de- 
claring the  terms  on  which  they  were  held  and  providing  for  the 
issuance  of  a  certificate  showing  the  amount  of  each  owner's  interest 
in  the  stock  so  held  in  trust.  This  agreement  did  not  in  any  essen- 
tial manner  change  the  nature  of  the  association  previously  existing. 
Its  essential  character  was  simply  a  common  ownership  of  stock  in 
various  corporations.  If  they  had  so  preferred,  the  owners  of  these 
several  associated  companies  could  have  organized,  in  the  state  of 
New  York,  for  example,  with  any  capitalization  desired,  each  could 


198  TRUSTS  OR  COMPETITION t 

then  have  lawfully  combined  with  all  of  the  other  companies,  forming 
one  corporation  to  transact  business  wherever  desired.  But  it  seemed 
preferable  instead  of  organizing  one  corporation  in  New  York,  to  or- 
ganize a  corporation  in  each  state  where  business  was  being  carried 
on,  so  that  the  business  transacted  in  each  state  might  be  conducted 
by  a  home  corporation  subject,  in  all  respects,  to  the  law  of  the 
state  where  located.  Accordingly  we  organized  a  Standard  Oil  Com- 
pany in  New  York,  in  New  Jersey,  in  Kentucky,  in  Iowa,  in  Minne- 
sota, and  similar  corporations  already  existed  in  Ohio  and  Pennsyl- 
vania. The  business  of  each  state  was  thus,  as  far  as  possible, 
transacted  by  a  corporation  organized  under  the  laws  of  that  state, 
subject  to  its  jurisdiction,  paying  taxes  there,  and  usually  officered 
by  citizens  and  residents  of  the  state.  If  this  government  were  a 
unit  instead  of  a  federation  of  states,  there  probably  would  have 
been  no  Standard  Oil  Trust. 

Increased  Product  and  Lowered  Prices. — 'Bearing  in  mind  that  oil 
was  discovered  in  1859,  the  co-operation  or  combination  of  refiners 
above  referred  to  began  in  1872,  and  the  Standard  Oil  Trust  was  or- 
ganized in  1881,  in  1870  the  production  of  oil  was  about  5,000,000 
barrels,  and  the  consumption  about  equal ;  price  of  crude  oil  at  the 
well,  $3.86  per  barrel;  price  of  export  oil  in  New  York,  barrel  in- 
cluded, $11  per  barrel.  At  the  close  of  1881  the  consumption  of  oil 
had  increased  to  over  19,000,000  barrels  per  year;  the  price  of  export 
oil  at  New  York  had  decreased  to  about  $3.36,  which,  estimating 
the  package  at  $1.50  per  barrel,  leaves  $1.86  as  the  price  per  barrel 
of  the  oil  and  yet  the  value  of  the  exports  amounted  to  over  $40,000,- 
000,  showing  an  enormous  increase  in  the  trade. 

Notwithstanding  the  wonderful  decrease  in  the  price  and  in- 
crease in  the  output  up  to  this  time,  the  decrease  in  price  and  increase 
in  supply  did  not  cease.  At  the  close  of  1887,  six  years  after  the 
creation  of  the  trust,  the  supply  to  the  markets  had  increased  to 
over  26%  million  barrels  of  42  gallons  each  per  year;  the  price  of 
crude  material  reduced  to  an  average  of  66.66  cents  per  barrel,  and 
the  price  of  110°  "Standard  White"  to  $2.81  per  barrel  of  50  gallons, 
including  the  barrel;  and  notwithstanding  the  almost  nominal  price 
of  the  oil  the  value  of  exported  products  reached  the  enormous  sum 
of  $46,824,933.  These  figures  speak  for  the  Standard  Oil  Company 
as  nothing  else  C9uld  do.  It  has  been  said  that  decrease  in  price  of 
refined  products  is  wholly  in  consequence  of  the  decline  in  price  of 
crude  oil.  But  look  at  the  figures:  In  1872  crude  oil  was  9.43  cents 
per  gallon,  and  refined  23.59  cents  per  gallon.  In  1887  crude  oil  was 
j.59  cents  per  gallon,  or  7.84  cents  less  than  in  1872.  Had  refined 
products  been  reduced  only  to  the  same  extent  it  would  have  been 
15.75  cents  per  gallon  in  1887;  but  it  was  only  6.72  cents  per  gallon. 
The  difference,  9.03  cents  per  gallon,  represents  the  reduction  in 
price  of  the  refined  product  after  eliminating  the  effect  of  the  decline 
in  crude  oil.  The  prices  of  all  other  products  of  petroleum  were  re- 
duced in  the  same  proportion  and  as  over  one  thousand  million  of 
gallons  of  the  crude  oil  were  consumed  in  1887  this  reduction  in  the 
cost  of  refined  products  after  the  allowance  for  the  reduction  in 
the  crude  benefited  the  public  to  the  extent  of  about  $100,000,000 
for  that  single  year.  For  this  the  Standard  claims  its  due  proportion 
of  credit. 


DISCRIMINATING  RAILROAD  RATES.  199 

Cheapening  of  Transportation. — In  1872  the  pipe-line  system  was 
in  its  infancy.  A  number  of  local  lines  existed.  Their  service  was 
inefficient  and  expensive.  There  was  no  uniform  rate.  The  United 
Refiners  undertook  to  unite  and  systematize  this  business.  They 

Kurehased  and  consolidated  various  little  companies  into  what  was 
>ng  known  as  The  United  Pipe-Line  System.  The  first  effect  of  this 
combination  was  a  reduction  of  prices  of  all  local  transportation  to 
a  uniform  rate  at  first  of  30  and  soon  after  of  20  cents  per  barrel. 
The  pipes  were  placed  at  every  well.  A  storage  system  was  also 
adopted.  Great  iron  tanks  were  built  in  which  oil  could  be  stored 
on  the  way  to  market.  The  cost  of  storage  has  been  reduced  until  it 
is  now  cheaper  than  for  any  other  commodity.  Certificates  were 
given  to  all  producers,  showing  the  amount  of  oil  stored  by  each 
and  these  certificates  have  become  practically  as  current  as  money 
and  are  dealt  in  at  the  New  York  Stock  Exchange. 

The  benefit  to  the  oil  trade  from  these  improvements  has  been 
incalculable.  Instead  of  the  Standard  being  the  sole  buyer,  the 
buyers  are  numbered  by  thousands.  The  producer  not  only  gets  the 
highest  price  which  competition  in  purchase  will  bring,  be  gets  also 
cash  in  hand. . 

The  figures  show  that  in  one  year  the  production  of  oil  exceeded 
31,000,000  barrels,  or  9,000,000  barrels  in  excess  of  consumption. 
Consider  what  this  means.  Every  day  of  that  year  iron  tankage  had 
to  be  built  to  accommodate  25,000  barrels  of  surplus  oil.  This  meant 
an  army  of  iron  workers  and  tank  builders,  at  a  cost  per  day  of 
$7,500.  Without  aggregated  capital,  without  combination  of  money 
and  effort  how  could  all  this  have  been  done? 

About  1879  it  was  discovered  that  the  railways  were  inadequate 
to  the  task  of  getting  the  oil  to  the  seaboard  as  rapidly  as  shipped. 
Combined  energy  and  capital  alone  were  equal  to  the  emergency. 
To-day  there  reach  from  Pennsylvania  and  New  York  to  the  cities 
iron  pipes  conducting  the  oil  as  it  comes  from  the  wells.  Two  such 
pipe  lines  reach  New  York  harbor  with  a  capacity  of  25,000  barrels 
per  day.  There  is  one  such  line  to  each  of  the  cities  of  Philadelphia, 
Baltimore,  Cleveland  and  Pittsburg,  built  by  the  Standard  Oil  Com- 
bination at  a  cost  of  millions  and  doing  business  for  the  public. 

Discriminating  Railroad  Rates.— -The  one  burden  of  charges 
against  the  Standard  is  that  it  has  received  special  rates  from  the 
railroads  which  enabled  it  to  distance  its  competitors.  There  is 
more  ground  for  this  than  for  any  other  charge  made  against  the 
Standard  Oil  Trust.  The  necessity  in  some  way  of  improving  and 
cheapening  transportation  was  a  strong  inducement  to  the  original 
combination.  There  were  competing  roads  and  it  was  found  that 
those  who  could  ship  in  large  and  uniform  quantities  could  have 
special  rates.  It  was  then  the  universal  mode  of  business.  The 
man  who  could  not  avail  himself  of  it  might  as  well  retire  from 
business.  The  Standard  availed  itself  of  this  mode  of  business.  It 
could  furnish  the  railroads  with,  not  carloads  but  train  loads  of  oil. 
Also  it  built  loading  stations  and  loaded  trains  by  its  own  labor.  It 
built  terminal  stations  where  it  received  and  unloaded  trains  itself. 
It  became  its  own  insurer  and  released  railroads  from  any  obligations 
for  damages.  It  found  that  the  country  had  not  white  oak  forests 


200  TRUSTS  OR  COMPETITION? 

enough  to  furnish  material  for  making  barrels  for  all  the  oil  to  be 
shipped,  and  it  experimented  on  car  after  car  for  carrying  in  bulk. 
When  the  proper  car  was  furnished  it  constructed  thousands  and 
placed  them  on  the  railroads.  For  these  services  it  demanded  and 
obtained  low  and  lower  rates.  It  is  true  the  Standard  often  got  a 
special  rate.  The  railroads  refused  to  carry  oil  for  the  same  prices 
for  those  who  shipped  in  packages,  carloads  or  less  than  carload  lots, 
who  did  not  do  their  own  loading  or  unloading  or  furnish  their  own 
cars  or  terminal  facilities. 

The  Interstate  Commerce  Commission  has  now  decided  that 
every  pound  of  oil  is  entitled,  whether  carried  in  barrels  or  in  bulk, 
to  reach  the  market  at  equal  rates.  This  is  founded  on  the  modern 
idea  that  energy  and  enterprise  and  capital  are  not  entitled  to  ad- 
vantage in  competition.  The  race  is  not  to  the  swift  nor  the  battle 
to  the  strong.  Controlled  by  such  ideas  there  is  no  benefit  to  the 
public.  All  are  placed  on  a  dead  level.  The  unfittest  as  well  as  the 
fittest  survive.  Whether  this  is  or  is  not  the  correct  principle,  the 
result  is  to-day  that  all  shippers  by  all  modes  are  charged  the  same 
rate  per  pound. 

Cheapening  the  Cost  of  Manufacture.— The  Association  of  Re- 
finers united  the  best  knowledge  and  skill  in  the  business.  If  one 
had  a  patent  it  was  open  to  all.  If  one  had  a  secret  the  others 
shared  it.  Methods  were  compared.  New  plans  were  tested.  Re- 
sults were  and  are  carefully  collated.  If  one  establishment  succeeds 
in  saving  the  fraction  of  a  cent  per  barrel  in  making  oil  the  reason 
is  known  and  the  method  of  saving  adopted.  If  good  results  are 
obtained  in  one  manufactory  and  bad  results  in  another,  the  reason 
is  at  once  discovered  and  faults  corrected.  Scientific  men  are  con- 
stantly employed  who  have  made  useful  discoveries  in  new  products 
and  new  methods  of  manufacture.  The  consequence  of  all  this  is 
that  since  1872  the  actual  cost  of  manufacture  of  refined  oil  has  been 
reduced  66  per  cent.  The  public  have  the  advantage  of  this  in  the 
reduced  price  at  which  the  oil  is  sold,  which  benefit  amounts  to  mil- 
lions annually. 

The  same  cheapening  of  cost,  has  taken  place  in  the  manufacture 
in  our  own  factories  of  barrels,  tin  cans,  boxes  for  enclosing  cans, 
paint,  glue  and  acid.  In  1872  barrels  cost  the  trade  $2.35.  They  now 
cost  us  $1.25,  representing  a  yearly  saving  of  $4,000,000.  Cans  then 
cost  30  cents  each,  now  15  cents,  making  a  saving  of  $5,400,000  a 
year.  In  1874  wooden  cases  cost  20  cents  each,  now  13  cents,  or  a 
saving  of  $1,250,000  a  year.  A  like  cheapening  has  taken  place  in 
the  manufacture  of  tanks,  pumps  and  everything  used  in  the  busi- 
ness. All  these  millions  are  saved  by  economies  which  combinations 
of  persons,  capital,  experience  and  skill  render  possible,  without  re- 
ducing the  wages  of  a  single  laboring  man. 

By-Products  of  Petroleum. — After  illuminating  oil  is  manufac- 
tured from  the  crude  petroleum,  a  large  residuum  is  left.  Up  to  1875 
this  was  almost  exclusively  used  as  fuel  at  the  refineries.  The 
Standard  devoted  special  attention  to  this  residuum,  sending  experts 
to  the  shale  works  of  Scotland,  and  prosecuting  exhaustive  investiga- 
tions on  all  lines.  As  a  consequence,  extensive  works  were  erected 
for  the  manufacture  of  products  from  this  residuum,  principally 


NEW  MARKETS-RUSSIAN  COMPETITION.  201 

lubricating  oils  and  paraffin  wax.  These  works  are  extensive  and 
manufacture  the  residuum  of  a  large  number  of  refineries.  Small 
refineries  cannot  advantageously  engage  in  this  branch,  of  business 
and  cannot  afford  to  manufacture  illuminating  oils  unless  they  can 
dispose  of  their  residuum.  This  is  one  of  the  reasons  why  so  many 
small  refineries  prove  failu-res.  The  cost  of  manufacture  of  lubri- 
cating oils  and  wax  has  been  reduced  by  improved  methods  and 
constant  attention,  and  the  price  to  the  consumer  has  been  constantly 
reduced,  averaging  to-day  50  per  cent  less  than  in  1878.  Illumina- 
ting oils  were  introduced  to  the  public  with  comparative  ease  because 
they  met  an  urgent  need,  but  lubricating  oils  were  slow  of  recogni- 
tion, having  to  supplant  sperm,  lard  and  fish  oils,  and  in  Europe  the 
products  of  shale  had  to  be  competed  with. 

Opening  New  Markets. — To  bring  consumption  up  to  the  level 
of  the  enormous  production,  something  besides  good  quality  and 
cheapness  was  necessary;  new  markets  had  to  be  opened.  When 
the  Standard  combination  was  formed  twelve  years  had  elapsed 
and  the  world  was  using  less  than  six  million  barrels  per  annum, 
and  of  that  three  and  a  half  million  barrels  were  exported.  In  two 
years  afterwards  the  exports  were  nearly  six  million  barrels.  The 
reason  for  this  remarkable  change  was  that  no  single  refinery  could 
afford  to  keep  agents  in  Europe  to  demonstrate  the  advantages  of 
this  product,  obtain  the  means  for  its  convenient  and  safe  trans- 
shipment and  force  it  upon  the  trade.  The  refineries  when  combined 
could  do  it,  did  do  it  and  continue  to  do  it.  The  consequence  is  that 
petroleum  is  to-day  the  peoples'  light  throughout  the  world.  It  is 
carried  wherever  a  wheel  can  roll  or  a  camel's  hoof  be  planted. 

The  Great  Russian  Competition. — The  development  of  the  great 
oil  fields  on  the  shores  of  the  Caspian  Sea  began  about  1872  when 
the  oil  lands  passed  into  private  hands.  In  1879,  195  refineries 
existed  with  a  capacity  of  1,400,000  barrels  annually.  It  was  then 
recognized  that  combinations  of  men  and  capital  were  necessary  to 
make  success  in  the  business  and  Nobel  of  Paris  put  in  $2,500,000. 
All  of  American  experience  was  utilized;  pipe-lines  built,  2,500  tank 
cars  placed  on  the  railroads,  large  stationary  tanks,  warehouses  and 
docks  were  erected,  ships  constructed  carrying  oil  in  bulk,  and  case 
and  can  factories  were  established.  In  a  word,  Standard  Oil  enter- 
prise and  methods  were  closely  imitated  along  the  shores  of  the 
Caspian.  Since  that  date  Russian  competition  has  to  be  fought  in 
every  portion  of  the  Eastern  Hemisphere.  Russian  oil  is  sold  in 
American  packages  under  American  trademarks.  The  crude  product 
is  cheaper  than  water,  varying  from  two  to  six  cents  per  barrel.  It 
is  rich  in  lubricating  oils  of  a  good  quality.  Its  refuse  is  used  for 
fuel  on  the  ships  which  transport  it.  The  Rothschilds  have  taken  hold 
of  the  business.  Enlarged  capital  and  energy  have  been  enlisted. 
These  must  be  met  with  enlarged  capital  and  energy  or  our  foreign 
trade  of  50  millions  annually  will  be  greatly  impaired.  Had  this  mat- 
ter been  left  to  individuals  to  be  met  without  combination  or  unity 
of  effort,  Russia  to-day  would  control  all  the  markets  of  the  east. 
Pass  a  law  that  persons  in  the  same  business  cannot  agree  upon 
prices  or  co-operate  in  their  business  and  in  five  years  instead  of  the 
annual  income  of  $50,000,000  from  oil  exports,  you  will  not  have 


202  TRUSTS  OR  COMPETITIONf 

$10,000,000.  Without  the  pipe-line  system,  the  cheap  transportation, 
and  the  improvements  herein  mentioned,  the  markets  of  Europe  and 
Asia  could  not  be  held  against  Russia  for  a  single  year. 

Causes  of  Criticism.— Such  is  briefly  the  history  of  the  rise,  prog- 
ress and  results  of  the  business  of  the  United  Refineries,  popularly 
known  for  many  years  as  the  Standard  Oil  Company  and  later  as 
the  Standard  Oil  Trust.  In  relation  to  the  companies  represented 
in  this  union,  they  have  been  guilty  of  no  stock  jobbing  and  no 
watering  of  stock;  no  creditor  has  suffered;  their  business  obligations 
are  strictly  fulfilled;  labor  is  amply  rewarded  and  it  has  an  unparal- 
leled record  of  satisfactory  relations  with  its  army  of  25,000  employes. 
What  then  are  the  causes  which  have  led  to  the  popular  opinion  that 
the  Standard  Oil  Trust  is  a  gigantic  monopoly  which  must  be 
crushed?  (1)  The  principal  reason  is  at  present  that  there  is  in 
the  air  a  socialistic  prejudice  against  capital.  (2)  On  account  of  its 
aggregation  of  large  capital  the  Standard  serves  as  a  type,  in  the 
public  estimation,  of  a  modern  monopoly  crushing  out  all  competition. 
It  is  not  and  never  has  been  a  monopoly  in  any  sense  of  the  word. 
It  does  not  possess  a  single  exclusive  franchise  or  special  privilege. 
All  the  corporate  privileges  it  possesses  are  open  to  all  persons  and 
may  be  obtained  by  simply  making  and  filing  a  paper  stating  a  desire 
to  be  incorporated. 

Neither  has  the  Standard  destroyed  competition.  In  1872,  the 
date  of  the  inception  of  this  union  of  refiners,  the  total  amount  of 
crude  oil  refined  was  about  five  and  a  half  million  barrels  annually. 
Of  this  business  the  refiners  who  ultimately  became  associated  in 
the  Standard  Trust  did  by  far  the  greater  proportion.  Competition 
at  home  and  abroad  has  never  ceased  for  a  single  instant  and  has 
always  been  strong  enough  to  give  the  public  all  the  advantages 
which  competition  confers.  Now,  in  1899,  of  the  total  amount  of  oil 
refined  in  the  United  States,  companies  which  are  in  competition 
with  the  Standard  do  17.7  per  cent. 

All  the  competing  refineries  have  benefited  by  the  Standard's 
efforts  at  improvement  and  by  its  money  expended  in  the  establishing 
of  markets.  Many  refineries  have  failed.  Competition  has  simply 
moved  to  a  higher  plane.  Those  who  could  not  or  would  not  follow 
business  in  its  new  lines  could  not  succeed.  Thousands  of  those 
who  enter  the  business  are  doomed  to  failure  no  matter  what  the 
circumstances;  no  refiner  has  failed  without  damning  the  Standard. 

Referring  again  to  the  complaints  against  the  Standard,  and 
their  contradictory  character — one  is,  in  effect,  that  the  Standard 
sold  its  products  so  low,  kept  the  margin  between  crude  and  refined 
oils  so  close  that  competitors  could  not  make  money  and  were  crushed 
out;  the  other  was  that  the  Standard  sold  too  high  and  made  too  much 
money.  Both  views  cannot  be  true.  The  fact  undoubtedly  lies  between 
the  two.  The  Standard's  methods  of  business  have  been  such  that  it 
could  sell  oil  products  at  figures  too  low  for  many  competitors  and 
still  make  a  fair  profit  for  itself.  If  those  methods  of  business 
are  justifiable  which  secure  the  greatest  good  to  the  greatest  num- 
ber, this  surely  cannot  be  condemned. 

Another  reason  for  the  popular  protest  against  the  Standard 
arises  from  the  complaints  of  oil  producers  or  well-owners  for  many 


SOME  EDITORIAL  COMMENT.  203 

years  that  the  Standard  for  its  own  purposes  kept  down  the  price  of 
crude  oil.  On  the  contrary  the  storage  and  certificate  system  by 
which  the  producers  sell  their  oil  on  exchanges  to  thousands  of  buy- 
ers instead  of  a  few  must  have  tended  to  better  prices.  That  system 
was  adopted  and  maintained  at  the  request  of  producers  and  without 
it  their  business  could  not  be  carried  on.  All  the  Standard's  efforts 
above  recorded  to  cheapen  manufacture  and  transportation  and  force 
products  on  home  and  foreign,  markets  must  have  greatly  benefited 
oil  producers.  With  forty  million  barrels  of  surplus  stock  in  tank 
how  could  good  prices  be  expected? 

But  it  is  said  that  the  Standard  has  speculated  in  these  certifi- 
cates and  sent  the  market  up  or  down  as  it  wished.  This  is  em- 
phatically denied.  It  has  not  speculated.  It  has  purchased  what  it 
needed  and  used  what  it  purchased.  It  has  bought  largely  at  times 
to  save  the  market  from  absolute  ruin,  and  for  some  years,  for  like 
reasons,  has  carried  a  large  part  of  the  stock  of  oil  at  a  loss  to  itself 
of  millions. 

Public  statistics  show  that  the  price  of  crude  oil  has  been  gener- 
ally governed  by  the  law  of  supply  and  demand.  Speculation  has 
made  the  public  buyers  and  held  prices  somewhat  higher  than  they 
would  otherwise  have  been.  At  times  speculation  may  have  depressed 
prices.  But  the  average  tells  the  story.  All  now  admit  that  over- 
production has  caused  all  the  trouble  The  oil  producer  now  knows 
and  admits  that  his  charges  against  the  Standard  in  1878  and  many 
subsequent  years  were  baseless  and  unjust.  But  the  influence  of 
those  unjust  charges  and  the  accompanying  public  excitement  is 
prejudicing  the  public  to-day  as  the  waves  caused  by  a  storm 
at  sea  will  fret  distant  shores  long  after  the  storm  is  over. 

Mr.  Dodd  closes  his  statement  as  follows: 

"I  have  dwelt  at  length  upon  the  history  of  the  Standard  because 
it  is  always  referred  to  as  embodying  all  the  evils  of  combinations 
and  trusts.  And  yet  the  facts  show  that  it,  or  some  similar  combina- 
tion of  persons  and  capital,  was  and  is  essential  to  the  building  up  and 
maintenance  of  the  American  oil  trade;  that  its  destruction  would 
'be  the  destruction  of  that  trade;  that  it  has  furnished  the  producer 
a  cash  market  and  the  best  possible  price  for  his  oil,  and  that  it  is 
benefiting  the  public  by  actual  reduction  in  cost  of  manufacture  and 
prices  to  the  extent  of  more  than  its  aggregated  capital  each  year. 
Let  the  state  or  national  legislature  provide  a  better  mode  for  carry- 
ing on  this  business  if  they  can,  but  let  them  not  despoil  the  structure 
until  a  better  is  provided  to  take  its  place." 

COMMENT. 

Mr.  Dodd  presents  one  side  of  the  shield.  Probably  the  other 
side  would  not  be  so  bright.  Without  entering  upon  the  long 
and  bitter  controversy  over  the  vices  and  virtues  of  the  Standard 
Oil  Trust,  this  may  be  said:  From  Mr.  Dodd's  statement  it  is 
evident  that  during  the  years  when  the  Standard  was  crushing 
out  all  formidable  competition  it  availed  itself  of  every  lawful 
advantage,  particularly  in  the  matter  of  transportation.  That  its 


204  TRUSTS  OR  COMPETITION f 

policy  against  all  rivals,  and  especially  the  weak  ones,  was  ruth- 
less and  unscrupulous  to  an  unprecedented  and  indefensible  de- 
gree is  charged  by  the  vanquished  refiners  and  their  friends  and 
is  apparently  confirmed  by  the  official  records.  It  is  seldom  that 
a  secret,  unfair  and  unlawful  combine  between  a  railway  and  a 
favored  shipper  is  judicially  exposed.  When  one  such  exposure 
occurs  it  is  therefore  proper  to  accept  the  showing  as  an  index 
to  the  general  policy  and  the  moral  standards  of  the  parties  in- 
volved. This  rule  applies  to  the  trial  of  the  well-known  case  at 
Marietta,  Ohio,  in  1885,  of  Parker  Handy  and  John  Paten,  trus- 
tees vs.  the  Cleveland  &  Marietta  Railroad  and  others.  This  case 
is  pretty  fully  stated  from  the  public  records  in  Prof.  Richard  T. 
Ely's  "Problems  of  To-day,"  page  203,  and  more  fully  in  Hud- 
son's "Railways  and  the  Republic,"  under  the  title,  "A  Commer- 
cial Crime."  Briefly,  the  railroad  in  question  was  in  the  hands 
of  a  receiver,  P.  Pease.  The  Standard  Oil  Company  owned  or 
controlled  pipe  lines  by  means  of  which  it  collected  and  piped 
the  oil  procured  by  it  in  the  vicinity  of  Macksburg,  Ohio,  a  sta- 
tion on  said  road,  to  be  carried  thence  by  rail  either  to  Cleveland 
or  Marietta.  It  thus  controlled  a  large  amount  of  freight,  which 
Receiver  Pease  was  naturally  desirous  of  securing.  The  Stand- 
ard Oil  Company,  through  its  general  manager,  O'Day,  demanded 
that  the  railroad  give  it  a  rate  of  10  cents  per  barrel  on  oil  from 
Macksburg  to  Marietta,  while  the  rate  charged  all  other  re- 
finers at  that  time  was  17%  cents.  This  demand  was  accom- 
panied with  the  intimation  that  the  Standard  would  lay  a  pipe 
line  from  Macksburg  to  Marietta  if  the  discriminating  rate  was 
not  conceded.  The  receiver  granted  the  10-cent  rate,  thus  giv- 
ing to  the  Standard  an  advantage  of  75  per  cent  in  transportation 
charges  over  all  its  competitors  at  Marietta.  But  this  was  only 
the  beginning.  The  next  chapter  is  best  told  in  the  language  of 
Receiver  Pease,  in  his  letter  to  Edward  S.  Rapallo,  general 
counsel  for  the  receiver,  32  Nassau  street,  New  York,  under  date 
of  February  25,  1885.  The  next  demand  of  the  Standard  was 
so  extraordinary  that  the  receiver,  being  practically  an  officer  of 
the  court,  felt  bound  to  fortify  himself  with  a  legal  opinion 
before  yielding.  In  the  course  of  his  letter  to  Rapallo  he  says: 

"Mr.  O'Day,  manager  of  the  Standard  Oil  Company,  met  the 
general  freight  agent  of  the  W.  &  L.  E.  Railroad  and  our  Mr.  Terry 
at  Toledo  about  February  12,  and  made  an  agreement  (verbal)  for 
the  carrying  of  their  oil  at  10  cents  per  barrel.  But  Mr.  O'Day  com- 
pelled Mr.  Terry  to  make  a  35-cent  rate  on  all  other  oil  going  to 
Marietta,  and  that  he  should  make  the  rebate  of  25  cents  per  barrel 
on  all  oil  shipped  by  other  parties  and  that  the  rebate  should  be 
paid  over  to  them  (The  Standard  Oil  Company)  thus  giving  us  10 
cents  per  barrel  for  all  oil  shipped  to  Marietta,  and  the  rebate  of  25 


TEE  MARIETTA  EPISODE.  205 

cents  per  barrel  going  to  the  Standard  Oil  Company,  making  that 
company  save  $25  per  day  clear  money  on  Mr.  Geo.  Rice's  oil 
alone." 

Mr.  Rapallo,  under  date  of  March  2,  1885,  answered  the  re- 
ceiver to  the  effect  that  the  law  would  not  permit  the  latter 
to  collect  money  from  one  shipper  and  pay  it  over  to  another,  but 
he  showed  the  receiver  how  he  could  lawfully  reach  the  same 
result  in  the  following  words: 

"You  are  at  liberty  to  arrange  for  the  payment  of  a  freight  by 
the  Standard  Oil  Company  calculated  upon  the  following  basis, 
viz.:  Said  company  to  be  charged  an  amount  equal  to  10  cents  per 
barrel  less  amount  equivalent  to  25  cents  per  barrel  for  all  oil  shipped 
by  Rice,  the  agreement  between  you  and  the  company  thus  being 
that  the  charge  to  be  paid  by  them  is  a  certain  sum  ascertained  by 
such  calculation." 

The  arrangement  was  made,  and  of  course,  resulted  in  giv- 
ing the  Standard  an  advantage  of  more  than  300  per  cent  over 
their  Marietta  competitors.  The  receiver  was  removed  by  the 
court.  The  Marietta  Leader  of  November  24,  1885,  says:  "Judge 
Baxter  characterized  Rapallo's  letter  as  being  'the  most  insolent 
paper  he  had  ever  known  to  be  presented  to  a  court.'  *  *  *  It 
is  very  clear  that  these  enormous  discriminations  have  been  dis- 
astrous to  our  city,  for  the  difference  in  rate  against  all  inde- 
pendent refiners  is  so  great  as  to  about  equal  their  full  profits 
on  oil  refined,  and  so  their  business  has  been  nearly  destroyed, 
except  that  of  Mr.  Rice,  who  was  driven  to  save  himself  by  the 
construction  of  a  pipe  line  of  his  own.'' 

Some  opponents  of  the  trust  system  point  to  this  authentic 
case  and  ask  (1)  what  force  can  "potential  competition"  have 
against  such  an  economic  bludgeon  so  wielded?  (2)  If  a  con- 
cern like  the  Standard  Oil,  owned  and  officered  by  men  as  re- 
spectable as  John  D.  Rockefeller,  is  capable  of  devising  and 
pursuing  such  a  policy,  secretly  or  openly,  what  may  be  ex- 
pected from  the  new  trusts,  which,  no  ma-tter  how  controlled 
at  first,  are  pretty  sure  to  fall  into  the  management  of  the  most 
forceful  and  least  scrupulous  of  their  future  owners? 

President  Hadley,  of  Yale  University,  in  his  latest  work, 
"Economics,"  page  159,  thus  characterizes  the  methods  of  the 
Standard  and  explains  the  odium  encountered  by  it  in  a  manner 
quite  different  from  Mr.  Dodd's.  He  says: 

"If  the  managers  of  a  combination  make  it  their  chief  concern 
to  suppress  competition  rather  than  to  realize  economies  in  pro- 
duction, their  policy  toward  trade  rivals  results  in  violation  of 
commercial  morality,  if  not  of  commercial  law.  Not  content  with 
obtaining  unfair  advantages  in  the  way  of  discriminating  rates 


206  TRUSTS  OR  COMPETITION  f 

for  the  transportation  of  its  goods,  the  combination  tries  to  ex- 
clude its  rivals  from  their  accustomed  markets  by  methods  of 
boycotting  and  intimidation,  which,  when  they  are  used  by  trade 
unions,  provoke  fierce  denunciation  from  the  same  men  who  have 
been  ready  to  practice  them  for  their  own  advantage.  Even  among 
those  combinations  which,  like  the  Standard  Oil  Company,  have 
realized  economies  and  reduced  rates  [prices]  for  their  product,  this 
unscrupulous  policy  toward  competitors  has  been  carried  to  such 
an  extent  as  to  create  a  just  prejudice  against  them,  a  prejudice 
which  is  enough  to  explain,  and  in  one  sense  to  justify,  the  ten- 
dency on  the  part  of  the  public  to  ignore  or  depreciate  the  indus- 
trial services  which  they  have  actually  rendered." 

Possibly  the  American  people  would  willingly  have  paid  a 
trifle  more  per  gallon  for  their  kerosene  and  witnessed  a  less  rapid 
growth  of  the  export  oil  trade  if  by  that  slight  sacrifice  they  could 
have  avoided  for  themselves  and  posterity  a  conspicuous  and  con- 
tagious example  in  commercial  immorality. 

Concerning  one  or  two  of  Mr.  Dodd's  statements  as  to  the  law 
and  the  economics  of  trade  combinations,  a  critical  person  might 
make  these  comments:  (1)  He  says,  "The  well-known  Coal  cases 
and  the  Salt  cases  were  arrangements  with  the  direct  and  avowed 

purpose   of   destroying    all   competition These   things 

are  just  as  unlawful  without  combination  as  with  it.  In  other 
words,  the  evil  is  not  in  combination,  but  in  its  purposes  and  re- 
sults." The  statement  is  inaccurate.  In  order  to  be  contrary  to 
public  policy  and  hence  illegal  a  combination  for  suppressing 
competition  need  not  have  that  "avowed"  purpose;  the  known  char- 
acter, the  natural  tendency  and  the  results  of  a  course  of  action 
are  conclusive  evidence  of  its  legality  or  illegality  without  any 
avowal  of  purpose,  as  instance  the  Marietta  case,  cited  above. 
(2)  Such  a  combination  or  course  of  action,  in  order  to  be  illegal, 
need  not  in  aim  or  in  fact  destroy  all  competition.  It  is  in  practice 
almost  never  possible  literally  to  destroy  all  competition  in  any 
trade  or  industry,  and  it  would  never  be  good  policy  to  do  so  even 
if  possible.  It  would  cost  too  much  in  money,  in  public  ill-repute, 
and  in  legal  peril.  Judging  the  course  of  action  of  the  Standard 
by  its  known  character,  its  natural  tendency  and  its  results,  that 
company  has  pursued  a  policy  which,  in  Mr.  Dodd's  words,  "is 
just  as  unlawful  without  combination  as  with,"  for,  so  judged, 
its  evident  purpose  has  been  to  suppress  all  competition  to  a  point 
which  would  give  it  a  virtual  monopoly  of  the  oil  refining  industry 
in  the  United  States.  Which  leads  to  :  (3)  Mr.  Dodd  says,  "It 
[the  Standard]  is  not  and  never  has  been  a  monopoly  in  any  sense 
of  the  word."  Let  us  see.  In  1889  the  Standard,  on  Mr.  Dodd's 
statement,  was  doing  75  per  cent  of  the  refining  in  the  United 
States.  This  fact,  as  every  recognized  authority  will  agree,  gave 


IS  THE  STANDARD  A  MONOPOLY*  207 

it  control  of  the  price  "up  to  the  importing1  point."  It  also  gave 
the  power  to  eliminate,  substantially,  not  literally,  the  remaining 
competition.  Every  economist  will  also  agree  that  this  state  of 
things  constituted  a  virtual  or  working  monopoly— which  is  the 
only  kind  of  monopoly  an  intelligent  business  man  ever  cares  or 
strives  for.  But  this  does  not  close  the  case;  in  1899,  also  on  Mr. 
Dodd's  statement,  the  Standard  is  doing  82.3  per  cent  of  American 
refining.  If  this  does  not  constitute  a  practical  (and  progressive) 
monopoly  in  the  only  possible  economic  and  commercial  sense, 
then  economic  science  will  have  to  be  rewritten.  Note  that  the 
question  just  here  is  not  whether  practical  monopolies  in  private 
hands  are  good  or  bad,  but— do  they  exist,  and  if  so,  is  the  Standard 
one  of  them  ?  There  is  need  of  clear  and  candid  statement  on  both 
sides  of  the  trust  question.  (4)  Finally,  while  giving  full  credit  to 
the  record  of  the  Standard's  business  enterprise  and  competency, 
it  is  fair  to  suggest  that  practically  all  of  this  work  of  developing 
the  oil  business,  improving  methods,  cheapening  cost  of  manu- 
facture, reducing  price  and  improving  quality  of  product  would 
have  been  accomplished  by  other  American  citizens  had  the 
founders  of  the  Standard  engaged  in  some  wholly  different  pursuit. 
To  compare  present  prices  with  prices  when  the  industry  was 
young  and  crude  means  little.  The  cheapening  was  inevitable 
as  gravitation.  Pipe  lines  were  not  originated  by  the  Standard, 
and  nearly  all  the  economies  in  cooperage  and  manufacture  of 
ca>ns,  cases,  etc.,  mentioned  by  Mr.  Dodd  are  equally  practiced  by 
leading  competing  refiners.  The  latter  are  also  supplying  oil  of  the 
same  quality  and  price  as  the  Standard's  product.  Professor  Ely 
remarks  that  the  competitors  of  the  Standard  have  not  been  van- 
quished by  its  superior  business  ability,  but  by  other  and  less 
creditable  elements  in  its  conduct  of  the  oil  refining  business. 


CHAPTER  VIII. 
THE  LAW  AND  THE  TRUSTS. 

Newness  of  Trust  Legislation  and  Court  Decisions— Attitude  of  American 
Judiciary  Toward  Monopoly— Origin  of  Our  Anti-Trust  Laws— Reasons 
for  Their  Extreme  Provisions— Combination  to  Compete  vs.  Com- 
bination to  Monopolize — The  Common  Law. 


Legislation  and  judicial  decisions  directly  affect- 
ing the  modern  trusts  are  naturally  as  recent  in  date  as 
is  the  industrial  movement  which  they  are  designed 
to  regulate  or  repress.  Only  in  February,  1887,  did 
Congress  take  the  first  formal  step  to  exercise  its  con- 
stitutional power  over  interstate  commerce  by  passing 
the  measure  entitled  "An  Act  to  Regulate  Commerce," 
and  three  years  later  was  enacted  the  present  federal 
anti-trust  law.  In  1889  ?daine  led  off  in  enacting  a 
statute  prohibiting  such  trusts  and  other  trade  com- 
binations "as  may  be  contrary  to  public  policy,"  and  that 
example  has  now  (1899)  been  followed,  with  all  varieties 
of  scope  and  vigor,  b}r  twenty-seven  other  states  and 
two  territories  and  by  Canada,  as  will  be  seen  by  con- 
sulting the  synopses  of  anti-trust  laws  in  this  volume. 
Of  those  states  which  have  not  thus  far  enacted  statutes 
of  this  general  nature,  several  have  anti-monopoly  pro- 
visions in  their  constitutions,  and  all  may  have  recourse 
to  the  principles  of  the  common  law  applied  by  their 
courts  to  emergencies  as  they  may  arise;  a  resort  which 
seems  to  have  been  sufficient  for  all  needs,  both  of  state 
and  nation,  prior  to  the  advent  of  the  present  trust  in- 
novation. 

208 


THE  LAW  AND  THE  TRUSTS.  209 

The  form  of  trust  which  gave  the  name  to  the  sys- 
tem of  quasi-monopolistic  organizations  now  under  dis- 
cussion was  first  exemplified  here  by  the  Standard  Oil 
Trust  and  is  now  unlawful  and  non-existent  in  the 
United  States.  That  form  was  suggested  by  a  similar 
method  of  combination  employed  for  a  different  pur- 
pose in  England  more  than  a  half  century  ago. 

Of  both  statute  law  and  judicial  decisions  bearing 
upon  this  subject,  by  far  the  greater  part  is  to  be  found 
on  this  side  of  the  Atlantic.  Two  causes  account  for 
this  fact:  First,  both  the  law  and  public  opinion  have 
long  been  more  tolerant  of  trade  combination  in  various 
forms  in  Great  Britain  than  in  the  United  States  and 
Canada.  Second,  British  lawmakers  and  courts  have 
not  been  called  on  to  confront  and  deal  with  a  problem 
corresponding  in  kind  or  magnitude  to  the  present  trust 
problem  in  the  United  States.  While,  on  the  one  hand, 
English  statutes  and  judicial  decisions  have  been  lib- 
eral toward  those  forms  of  trade  combinations  and 
agreements  which  have  appeared  to  be  reasonable  as 
tending  to  prevent  or  limit  foolish  and  destructive  meth- 
ods of  competition,  on  the  other  hand,  whatever  indi- 
viduals may  have  occasionally  attempted,  the  business 
community  in  England  has  never  misconstrued  that 
liberality  by  seeking  to  do  away  with  the  competitive 
system  and  establish  in  its  place  a  system  of  practical 
private  monopolies. 

The  broad  and  enduring  basis  of  legal  prohibitions 
and  restraints  against  the  trust  is  the  historic  fact  that 
what  we  know  as  public  policy  abhors  private  monopoly, 
as  nature  is  said  to  abhor  a  vacuum.  In  every  English- 
speaking  country  since  Anglo-Saxon  civilization  really 
took  form  this  proposition  has  been  true.  At  common 
law,  in  all  statutes,  state  and  federal,  in  all  sustained 
judicial  decisions  treating  upon  the  subject  and  in  the 
treatises  of  all  recognized  law  writers,  condemnation 
and  reprobation  of  private  monopoly  appears  as  a  con- 

14 


210  TRUSTS  OR  COMPETITION? 

slant  and  leading  factor.  That  this  attitude  of  the  legis- 
lative and  judicial  mind  is  in  accord  with  the  instincts 
and  judgment  of  the  people  and  is  universal  and  per- 
manent there  can  be  no  doubt.  This  being  true,  oppon- 
ents of  the  trusts  insist  that  it  is  only  a  question  of 
time  and  detailed  method  whether  any  system  of  private 
monopoly,  partial  or  complete,  wTill  be  prevented,  or 
will  be  overthrown  if  temporarily  established;  that  if 
ways  do  not  exist  they  will  be  devised  or  created. 

Soon  after  the  Standard  Oil  Trust  reached  what 
may  be  called  its  early  maturity  and  developed  its  pe.- 
culiar  aggressive  policy,  the  possibilities  in  that  direc- 
tion aroused  the  apprehensions  of  the  people  both  in 
the  United  States  and  Canada.  In  1888  investigations 
of  the  trust  problem  were  ordered  by  our  national  House 
of  Representatives,  by  the  Senate  of  New  York  and  by 
the  Canadian  House  of  Commons.  Largely  asi  a  re- 
sult of  the  testimony  taken  and  the  developments  made 
during  these  investigations,  anti-trust  legislation  was 
enacted  by  Congress,  by  the  Dominion  of  Canada  and 
by  many  of  our  states  in  the  years  from  1889  to  1899. 
All  these  statutes  have  as  a  common,  central  purpose 
the  prevention  and  punishment  of  monopoly,  approxi- 
mate or  complete,  in  private  hands. 

Inasmuch  as  monopoly  in  trade  is  necessarily  pro- 
gressive in  its  development  and  may  have  all  gradations 
of  effectiveness,  it  was  inevitable  that  the  legislatures  in 
framing  their  statutes  and  the  courts  in  deciding  cases 
should  deal  not  simply  with  the  final  culmination  of  the 
monopolizing  process  or  with  complete  monopoly,  but 
should  aim  their  prohibitions  at  the  various  measures, 
steps  and  intentions  tending  or  leading  up  to  such  con- 
summation. Accordingly,  nearly  all  anti-trust  laws  de- 
fine a  trust  to  be  a  combination  or  conspiracy  in  re- 
straint of  trade  or  competition.  For  example,  the  fed- 
eral anti-trust  act  of  July  2,  1890,  provides  that  "every 
contract,  combination  in  the  form  of  trust  or  otherwise, 


DIFFICULTIES  OF  LEGISLATION.  211 

or  conspiracy  in  restraint  of  trade  or  commerce  among 
the  several  states  or  with  foreign  nations,  is  hereby  de- 
clared to  be  illegal.  *  *  *  And  every  person  who 
shall  monopolize,  or  combine  or  conspire  with  any  other 
person  or  persons  to  monopolize,  any  part  of  the  trade 
or  commerce  among  the  several  states  or  with  foreign 
nations  shall  be  deemed  guilty  of  a  misdemeanor." 

One  result  of  the  sweeping  language  thus  employed 
in  the  federal  and  state  statutes  is  that  those  statutes, 
by  their  language,  appear  to  apply  to  all  possible  trade 
combinations  which  in  intent  or  effect,  or  to  any  degree, 
restrain  or  limit  competition.  Obviously  this  could  not 
have  been  the  purpose  of  the  legislative  mind,  for  there 
are  a  thousand  ways  in  which  business  men  every  day, 
and  necessarily,  make  arrangements  and  agreements 
which,  to  some  extent,  restrain  trade  and  limit  com- 
petition. If  the  attempt  should  be  made  to  prohibit 
all  arrangements  of  this  nature,  the  wheels  of  commerce 
and  business  of  every  sort  would  well-nigh  be  brought  to 
a  standstill.  And  this  is  the  chief  embarrassment  at- 
tending the  enactment  and  enforcement  of  all  legislation 
of  this  nature;  an  embarrassment  which  the  federal 
Supreme  Court  has  not  escaped,  namely,  the  difficulty 
of  drawing  a  line  between  trade  combinations  and  agree- 
ments which  are  reasonable  and  those  which  are  un- 
reasonable— those  which  are  proper  and  virtually  un- 
avoidable in  exercising  the  freedom  of  contract  and 
transacting  business  affairs,  and  those,  on  the  other 
hand,  which  are  clearly  contrary  to  public  policy,  be- 
cause monopolistic  in  tendency  or  intent  and  hence  detri- 
mental to  public  welfare. 

But  out  of  this  temporary  confusion  of  counsels  are 
emerging  order  and  consistency.  At  no  time  has  there 
been  any  lack  of  uniformity  in  the  general  attitude  of 
the  highest  courts,  state  and  national,  in  their  interpre- 
tation of  the  principles  of  the  common  law,  and  their 
application  to  the  never-ending  controversy  between  at- 


212  TRUSTS  OR  COMPETITIONt 

tempted  monopoly  on  the  one  hand  and  open  competi- 
tion on  the  other.  Always  and  everywhere  the  trend 
of  decisions  has  been  against  monopoly  in  every  guise, 
while  latterly  and  until  the  very  recent  phenomenal 
development  of  the  trust  system  there  has  been  a  steady 
relaxation  of  the  legal  prohibitions  upon  such  forms  of 
trade  combination  and  association  as  seemed  reasonable 
in  carrying  out  the  details  of  a  competitive  system.  As 
elsewhere  stated,  in  practically  all  of  the  states  there 
now  exists  absolute  freedom  of  association  of  indi- 
viduals and  combination  of  capital  through  the  forma- 
tion of  corporations  for  all  lawful  purposes.  Also,  there 
has  been  no  disposition  on  the  part  of  lawmakers  or 
courts  to  resist  the  natural  tendency  everywhere  mani- 
fest toward  large-scale  production  with  greater  capital, 
when  free  from  monopolistic  taint  and  held  within  the 
lines  of  effective  competition.  The  law  and  the  courts 
have  treated  with  tolerance,  if  not  with  liberality,  the 
tendency  to  combine  for  purposes  of  competition.  But 
recently  the  legislatures  and  the  courts  have  found 
themselves  confronted  with  the  necessity  of  resisting 
the  movement  toward  combination  to  monopolize.  The 
phenomenal  and  sudden  development  of  the  trust  sys- 
tem has  compelled  this  apparent  change  of  attitude, 
which,  however,  is  only  apparent.  The  change  is  in  the 
character  of  the  problem  to  be  treated.  In  this  emer- 
gency it  should  not  be  cause  for  surprise,  if,  in  some 
states,  the  legislative  pendulum  has  temporarily  swung 
to  the  extreme  of  resisting  all  combinations  which  re- 
sult in  restraint  of  competition,  even  when  they  are  in 
fact  reasonable  and  proper.  The  anti-trust  laws  of  the 
several  states,  summarized  nerein,  illustrate  this  pass- 
ing tendency.  In  the  opinion  of  some  the  license  exer- 
cised by  the  organizers  of  trusts  in  virtually  suppressing 
competition  will  compel,  for  a  time,  a  restriction  of  the 
liberty  of  all  in  this  matter  of  agreeing  or  combining 
even  within  the  lines  of  open  competition. 


THE  GLUCOSE  CASE.  213 

Herewith  is  published  a  clear  statement  of  the 
scope  and  bearing  of  the  federal  anti-trust  statute  since 
its  interpretation  and  application  by  the  federal  Su- 
preme Court 

Inasmuch  as  the  turning  point  in  the  remedial  treat- 
ment of  the  trust  is  in  connection  with  the  question  of 
freedom  of  contract  as  impliedly  guaranteed  by  the 
federal  constitution,  a  most  thorough  and  competent 
discussion  of  this  subject  is  presented  in  the  following 
pages,  as  furnished  by  one  of  the  ablest  of  American 
lawyers,  under  the  title,  "Extent  and  Limits  of  Legis- 
lative Control  Over  Freedom  of  Contract."  While  this 
discussion  by  Mr.  Dye  is  from  the  standpoint  of  one 
who  evidently  considers  the  trust  movement  as  a  natural 
outgrowth  of  economic  conditions,  and  while  some  of  its 
conclusions  will  be  sharply  questioned,  it  is  candid,  clear 
and  exhaustive. 

In  the  article,-  "Remedies,"  under  the  sub-title, 
"Remedy  by  Trust  Disintegration,"  will  be  found  some 
views  of  an  interesting  nature  concerning  the  disrup- 
tion of  the  trusts  through  the  steady  pressure  and  the 
judicial  application  of  the  prohibitions  of  the  common 
law,  reinforced  by  state  statutes,  against  all  organiza- 
tions embodying  practical  monopolies.  Recent  judicial 
decisions,  notably  that  of  the  Glucose  case,  by  the  Su- 
preme Court  of  Illinois,  are  attracting  wide  attention, 
and  causing  much  debate  as  to  what  further  may  follow 
along  the  same  general  line.  The  recently  recorded  at- 
titude of  the  federal  Supreme  Court  adverse  to  all 
monopolistic  tendencies  and  aggregations  adds  interest 
to  the  situation. 


214  TRUSTS  OR  COMPETITION? 

TRUSTS  UNDER  THE  FEDERAL  CONSTITUTION. 

The  Extent  and  Limits  of  Legislative  Control  Over  the  Freedom  of  Con- 
tract—The Case  Stated— Power  of  Congress  in  the  Premises— Power 
of  State  Legislatures — Sacredness  of  Private  Property — Inalienable 
Bight  of  Every  Citizen  to  Do  What  He  Will  with  His  Own— One 
Corporation  May  Lawfully  Purchase  the  Assets  and  Business  of  All 
Others— The  Resulting  Suppression  of  Competition  No  Bar  to  the 
Transaction — The  Modern  Monopoly-trust  Legally  Unassailable. 

[BY  MB.  JOHN  T.  DTE,  OP  THK  INDIANAPOLIS  BAB.] 

[By  far  the  ablest  presentation  that  has  yet  been  made  of 
the  propositions  of  constitutional  law  upon  which  the  modern 
trust  system  claims  to  repose,  and  by  which  it  claims  to  be  pro- 
tected against  successful  assault,  has  been  furnished  by  Mr. 
John  T.  Dye,  general  counsel  for  the  Cleveland,  Cincinnati,  Chi- 
cago &  St.  Louis  Railway  Company.  It  was  embodied  in  an  ad- 
dress delivered  by  him  at  the  last  annual  meeting  of  the  Indiana 
State  Bar  Association  (August,  1899),  and  is  given  here  by  his 
special  permission  and  without  material  abbreviation.  The  other 
view  would  be  that  so  far  as  the  courts  outside  of  New  Jersey 
have  yet  reached  and  passed  upon  the  central  question  involved 
in  the  present  trust  movement  (namely,  the  legal  right  of  one 
corporation  deliberately  to  obtain  and  then  to  operate  a  virtual 
monopoly  of  an  entire  industry  within  the  United  States  by  pur- 
chasing to  that  end  all  or  nearly  all  of  the  previously  independ- 
ent plants  and  businesses  constituting  that  industry),  they  have 
not  sustained  Mr.  Dye's  contention  that  such  a  course  is  vali- 
dated and  protected  by  the  guaranty  of  freedom  of  contract  im- 
pliedly  embodied  in  the  federal  constitution.  What  the  United 
States  Supreme  Court  may  decide  remains  to  be  seen,  but  oppo- 
nents of  the  trust  suggest  that  the  outgiving  of  that  tribunal 
in  deciding  the  Traffic  Association  and  Trans-Missouri  cases  in- 
dicates that  systematic  monopoly  artificially  achieved,  as  in  our 
trust  system,  will  need  to  find  some  other  legal  warrant  than 
that  which  is  furnished  by  freedom  of  contract. 

After  summarizing  the  remarkable  industrial  development 
in  the  United  States,  especially  during  the  last  two  decades,  and 


TRUSTS  AND  THE  FEDERAL  CONSTITUTION.          215 

stating  that  in  the  opinion  at  many  "unrestrained  competition 
in  some  industries  has  become  so  fierce  and  destructive  as  to 
be  ruinous,  and  combination  under  such  conditions  is  absolutely 
indispensable  to  the  public  welfare,"  Mr.  Dye  refers  to  the 
present  phenomenal  tendency  toward  industrial  consolidation 
and  then  takes  up  the  special  theme  of  his  address— "The  extent 
and  limits  of  legislative  control  over  the  freedom  of  contract;" 
in  other  words,  the  question  of  the  power  of  Congress  and  the 
State  Legislature  over  the  modern  Trust.— The  Editor.] 


When  the  people  are  disturbed  by  any  change  in  economic 
and  social  conditions  from  which  they  apprehend  real  or 
imaginary  evils,  the  first  impulse  is  to  repress  the  movement 
by  legislation.  But,  as  economic  and  social  laws  are  sometime* 
stronger  than  legislative  enactments,  these  attempts  have  not 
always  been  successful.  Such  legislation  often  produces  results 
entirely  different  from  those  intended  and  sometimes  accelerates 
the  very  movement  it  is  designed  to  repress. 

The  Question  Stated.— Whether  this  movement  be  for  good 
or  evil  is  an  economic  and  social  question^  and  not  a  legal  one; 
and  economic  questions  have  a  way  of  working  out  their  owu 
solution.  It  is  clear,  however,  that  there  is  no  way  to  arrest 
this  movement  except  by  the  legislative  control  of  the  freedom 
of  contract  in  the  use  and  disposition  of  property,  in  such  man- 
ner as  to  prevent  the  employment  of  vast  amounts  of  capital  in 
one  class  of  business  under  unity  of  control  and  management; 
and  we  are  confronted  with  the  legal  question,  How  far  is  this 
possible  under  our  system  of  government? 

The  legal  question  would  be  comparatively  simple  in  a 
government  where  the  sovereignty  was  vested  in  one  body,  or 
head,  but  it  is  more  complicated  under  our  system  of  govern- 
ment, where  sovereignty  rests  in  the  people,  and  they  have 
divided  up  and  parceled  out  its  exercise  between  the  federal 
government  and  the  forty-five  states,  and  between  the  executive, 
legislative  and  judicial  departments,  and  have  incorporated  in 
the  organic  law  all  the  checks:  that  could  be  devised  upon 
the  exercise  of  sovereign  power,  to  protect  and  preserve  the 
historic  rights  which  the  English  race  has  acquired  in  its  loug 
contest  for  freedom.  The  great  contribution  of  English  speak- 
ing people  to  civilization  has  been  in  developing  and  establish- 
ing institutions  which  enlarge,  protect  and  defend  the  area  of 
individual  freedom,  the  right  to  liberty,  property  and  the  pursuit 


216  TRUSTS  OR  COMPETITION? 

of  happiness.  And  this  has  been  accomplished  by  limiting  the 
functions  of  the  state,  conferring  the  exercise  of  different  por- 
tions of  governmental  authority  upon  separate  agencies,  and 
restraining  the  action  of  these  agencies  by  the  various  checks 
and  devices-  which  have  been  discovered  in  the  painful  struggle 
of  five  centuries. 

"It  is  the  felicity  of  the  American  people,"  says  Professor 
Hare,  "that,  while  they  are  sovereign,  they  have  given  bonds 
not  to  exercise  their  power  despotically,  and  cannot,  even  on 
the  pretense  of  necessity,  or  of  the  greatest  good  of  the  greatest 
number,  disregard  the  rights  of  individuals."  Hare's  American 
Constitutional  Law,  p.  1243. 

The  constitution  confers  on  Congress  exclusive  power  within 
a  carefully  defined  sphere,  in  which  the  states  have  no  juris- 
diction. 

As  to  powers  not  granted  to  the  national  government,  each 
of  the  states  is  supreme  in  its  own  territory,  but  has  no  juris- 
diction beyond  its  boundaries.  No  state  can  exercise  any  con- 
trol outside  of  its  own  territory  over  the  acts  or  contracts  of  in- 
dividuals or  corporations  residents  of  other  states.  The  citizens 
of  each  state  are  also  citizens  of  the  United  States,  and  entitled 
to  the  privileges  and  immunities  of  citizens  in  the  several  states. 

The  exercise  of  governmental  power  is  further  divided  be- 
tween legislative,  judicial  and  executive  departments,  and  the 
action  of  each  department  is  confined  to  its  own  sphere.  Legis- 
lation can  be  exercised  only  within  the  sphere  of  "legislative 
power,"  and  is  also  subject  to  the  limitations  contained  in  the 
constitution  to  protect  the  historic  rights  which  are  declared 
Inalienable  by  the  declaration  of  independence. 

So  that  a  legislative  enactment  to  be  law  must  be  (1)  within 
the  sphere  of  "legislative  power,"  (2)  it  must  be  within  the 
Jurisdiction  of  the  legislative  body  enacting  the  statute,  and  (3) 
It  must  not  violate  the  organic  law  ordained  in  the  constitution. 

I. 

THE  POWER  OF  CONGRESS  OVER  THE  FREEDOM  OF  CONTRACT. 

Congress  has  only  such  powers  as  are  expressly  granted  to 
it  by  the  constitution,  and  as  are  necessary  and  proper  to  carry 
out  such  express  powers.  Among  these  are  the  power  to  enact 
a  bankruptcy  law;  the  power  to  coin  money  and  regulate  the 
value  thereof,  and  the  power  to  regulate  commerce  among  the 
states  and  with  foreign  nations. 

Under  the  power  to  pass  a  bankruptcy  law,  and  under  the 
power  to  coin  money  and  regulate  the  value  thereof,  Congress 


POWERS  OF  CONGRESS.  217 

may  destroy  the  obligations  of  contracts.  Where  a  contract  has 
been  made  payable  in  dollars,  Congress  may  change  the  value 
of  the  dollar  and  the  contract  will  be  payable  in  legal  dollars 
at  the  time  of  its  enforcement.  Congress  may  also  make  paper 
money,  issued  by  the  government,  legal  tender.  But  where  the 
contract  is  made  payable  in  commodities,  or  in  so  many  ounces 
of  gold  or  silver,  Congress  cannot  alter  the  contract  by  requir- 
ing it  to  be  paid  in  a  different  commodity  or  a  less  amount 
of  bullion  than  that  stipulated. 

It  is  not  in  the  power  of  Congress  to  prevent  parties  from 
making  contracts  payable  in  bullion  or  commodities,  nor  in  the 
power  of  the  states.  The  states  are  forbidden  by  the  constitu- 
tion to  impair  the  obligation  of  contracts,  but  no  such  restraint 
is  imposed  on  the  United  States;  its  inability  arises  solely  from 
want  of  power,  and  ceases  to  exist  when  a  contract  stands  in 
the  way  or  falls  within  the  scope  of  any  of  the  powers  con- 
ferred expressly  or  impliedly  by  the  constitution.  Hare's  Ameri- 
can Constitutional  Law,  1239,  Trebilcock  v.  Wilson,  12  Wall. 
687;  Bronson  v.  Rhodes,  7  Wall.  229. 

The  Commerce  Clause  of  the  Constitution. — The  power  to 
regulate  commerce  with  foreign  nations,  among  the  several 
states  and  with  the  Indian  tribes,  is  committed  by  the  constitu- 
tion to  Congress. 

In  this  vast  field  its  power  is  supreme  and  exclusive;  it 
may  make  such  regulations  as  its  judgment  dictates,  subject  only 
to  the  limitations  imposed  in  the  constitution.  It  can  impose  no 
tax  or  duty  upon  articles  exported  from  any  state.  It  can  give 
no  preference,  by  any  regulation  of  commerce,  to  ports  of  one 
state  over  those  of  another.  No  person  can  be  deprived  of 
liberty  or  property  without  due  process  of  law,  nor  shall  private 
property  be  taken  for  public  use  without  just  compensation. 

Over  contracts  coming  within  the  sphere  of  foreign  and 
interstate  commerce,  the  states  have  no  jurisdiction,  except  in 
the  exercise  of  the  taxing  power,  the  police  power  and  the 
power  of  eminent  domain,  all  of  which  are  subject  to  the 
limitations  of  the  federal  constitution. 

Commerce  Among  the  Several  States.— While  the  confusion 
and  friction  wrought  by  conflicting  legislation  of  jealous  states 
was  one  of  the  strongest  incentives  to  the  formation  of  the 
Federal  Union,  it  is  worthy  of  note  that  until  1887  there  was 
no  general  act  to  regulate  interstate  commerce.  We  had  a 
whole  century  of  splendid  achievement,  unparalleled  in  the 
history  of  the  world.  Our  railroad  system  had  been  completed 
and  operated  by  private  enterprise,  practically  without  restraint 


218  TRUSTS  OR  COMPETITION? 

or  regulation  by  Congress,  including  the  continental  roads,  to 
build  which  Congress  largely  contributed  the  money. 

Sir  Henry  Maine,  in  his  Essay  on  Popular  Government,  page 
51,  declares  that  "all  this  beneficent  prosperity  reposes  on  the 
sac-redness  of  contract  and  the  stability  of  private  property; 
the  first  the  implement,  and  the  last  the  reward,  of  success  in  the 
universal  competition." 

And  the  act  to  regulate  commerce,  passed  in  1887,  in  the 
language  of  Jackson,  J.,  in  I.  C.  G.  v.  B.  &  O.  R.  R.  Co.,  43 
Fed.,  37,  which  has  been  three  times  cited  with  approval  by 
the  Supreme  Court,  "leaves  common  carriers  as  they  were  at 
common  law,  free  to  make  special  contracts  looking  to  the  in- 
crease of  their  business,  to  classify  their  traffic,  to  adjust  and 
apportion  their  rates  so  as  to  meet  the  necessities  of  commerce, 
and  generally  to  manage  their  important  interests  upon  the 
same  principles  which  are  regarded  as  sound  and  adopted  in 
other  trades  and  pursuits"  *  *  *  "subject  to  the  two  leading 
prohibitions  that  their  charges  shall  not  be  unjust  or  unrea- 
sonable, and  that  they  shall  not  unjustly  discriminate  so  as 
to  give  undue  preference  or  advantage',  or  subject  to  undue 
preference  or  disadvantage  persons  or  traffic  similarly  circum- 
stanced." 

While  Congress  has  power  to  fix  rates  or  charges  for  inter- 
state transportation,  there  was  no  attempt  to  do  so  in  the  act 
to  regulate  commerce,  and  if  such  regulation  should  be  attempted 
in  the  future,  the  limitation  of  the  fifth  amendment  would  apply 
to  the  action  of  Congress  the  same  rule  which  has  been  applied 
under  the  fourteenth  amendment  to  the  action  of  the  states,  and 
would  prohibit  the  establishment  of  rates  for  the  interstate 
transportation  of  persons  or  property  that  would  not  admit  of 
the  carrier  earning  such  compensation  as  should,  under  all  the 
circumstances,  be  just  to  it  and  to  the  public,  without  some 
proceeding  by  due  process  of  law  to  determine  as  to  the  reason- 
ableness of  such  rates.  Smith  v.  Ames,  18  Sup.  Ct.  Reporter, 
426. 

Limits  of  Powers  of  Congress.— Congress  has  unquestioned 
power  to  prevent  contracts,  combinations  or  conspiracies  to 
restrain  trade  that  come  within  the  sphere  of  its  jurisdiction 
to  regulate  interstate  or  foreign  commerce,  but  outside  of  this 
field  it  has  no  such  power. 

The  rule  upon  this  question  is  very  clearly  stated  in  re 
Greene,  52  Fed.  Rep.,  113  (1892),  in  a  lucid  opinion  construing 
the  anti-trust  law  of  July  2,  1890. 

"Congress  may  place  restrictions  and  limitations  upon  the  right 
of  corporations  created  and  organized  under  its  authority  to  acquire, 


WHAT  IS  INTER-STATE  COMMERCE f  219 

use  and  dispose  of  property.  It  may  also  impose  such  restrictions 
and  limitations  upon  the  citizen  in  respect  to  the  exercise  of  a  public 
privilege  or  franchise  conferred  by  the  United  States.  But  Congress 
certainly  has  not  the  power  or  authority  under  the  commerce  clause, 
or  any  other  provision  of  the  constitution,  to  limit  and  restrict  the 
right  of  corporations  created  by  the  states,  or  the  citizens  of  the 
state,  in  the  acquisition,  control  and  disposition  of  property.  Neither 
can  Congress  regulate  or  prescribe  the  price  or  prices  at  which  such 
property  or  the  products  thereof  shall  be  sold  by  the  owner  or  owners, 
whether  corporations  or  individuals.  It  is  equally  clear  that  congress 
has  no  jurisdiction  over,  and  can  not  make  criminal  the  aims,  pur- 
poses and  intentions  of  persons  in  the  acquisition  and  control  of 
property,  which  the  states  of  their  residence  or  creation  sanction  and 
permit.  It  is  not  material  that  such  property,  or  the  products  thereof, 
may  become  the  subject  of  trade  or  commerce  among  the  several 
states  or  with  foreign  nations.  Commerce  among  the  states  within 
the  exclusive  regulating  power  of  Congress  'consists  of  intercourse 
and  traffic  between  their  citizens,  and  includes  the  transportation  of 
persons  and  property  as  well  as  the  purchase,  sale  and  exchange  of 
commodities.'  County  of  Mobile  vs.  Kimball,  102  U.  S.  691-702; 
Gloucester  Ferry  Co.  vs.  Pennsylvania,  114  U.  S.  203,  5  Sup.  Ct. 
Rep.  826. 

"In  the  application  of  this  comprehensive  definition,  it  is  settled 
by  the  decisions  of  the  Supreme  Court  that  such  commerce  includes, 
not  only  the  actual  transportation  of  commodities  and  persons  be- 
tween the  states,  but  also  the  instrumentalities  and  processes  of  such 
transportation.  That  it  includes  all  the  negotiations  and  'contracts 
which  have  for  their  object,  or  involve  as  an  element  thereof,  such 
transmission  or  passage  from  one  state  to  another.  That  such  com- 
merce begins,  and  the  regulating  power  of  Congress  attaches,  when 
the  commodity  or  thing  traded  in  commences  its  transportation  from 
the  state  of  its  production  or  situs  to  some  other  state  or  foreign 
country,  and  terminates  when  the  transportation  is  completed,  and 
the  property  has  become  a  part  of  the  general  mass  of  the  property 
in  the  state  of  its  destination.  When  the  commerce  begins  is  deter- 
mined not  by  the  character  of  the  commodity,  nor  by  the  intention  of 
the  owner  to  transfer  it  to  another  state  for  sale,  nor  by  his  prepara- 
tion of  it  for  transportation,  but  by  its  actual  delivery  to  a  common 
carrier  for  transportation,  or  the  actual  commencement  of  its  trans- 
fer to  another  state.  At  that  time  the  power  and  regulating  authority 
of  the  states  cease,  and  that  of  Congress  attaches  and  continues, 
until  it  has  reached  another  state,  and  become  mingled  with  the 
general  mass  of  property  in  the  latter  state. 

"That  neither  the  production  nor  manufacture  of  articles  or  com- 
modities which  constitute  subjects  of  commerce,  and  which  are  in- 
tended for  trade  and  traffic  with  citizens  of  other  states,  nor  the 
preparation  for  their  transportation  froiu  the  state  where  produced 
or  manufactured,  prior  to  the  commencement  of  the  actual  transfer, 
or  transmission  thereof  to  another  state,  constitutes  that  interstate 
commerce  which  comes  within  the  regulating  power  of  Congress;  and, 
further,  that  after  the  termination  of  the  transportation  of  commodi- 
ties or  articles  of  traffic  from  one  state  to  another,  and  the  mingling 


220  TRUSTS  OR  COMPETITION t 

or  merging  thereof  in  the  general  mass  of  property  in  the  state  of 
destination,  the  sale,  distribution  and  consumption  thereof  in  the 
latter  state  forms  no  part  of  interstate  commerce.  Pensacola  Tel. 
Co.  vs.  Western  Union  Tel.  Co.,  96  U.  S.  1;  Brown  vs.  Huston,  114 
U.  S.  622,  5  Sup.  Ct.  Rep.  1091;  Coe  vs.  Errol,  116  U.  S.  517-520, 
6  Sup.  Ct.  Rep.  475;  Robbing  vs.  Taxing  Dist.,  120  U.  S.  497,  7  Sup. 
Ct.  Rep.  592;  Kidd  vs.  Pearson,  128  U.  S.  1,  9  Sup.  Gt.  Rep.  6.  In 
the  latter  case  the  Supreme  Court  pointed  out  the  distinction  between 
commerce  and  the  subjects  thereof,  and  held  that  the  manufacture  of 
distilled  spirits,  even  though  they  were  intended  for  export  to  other 
states,  was  not  commerce,  falling  within  the  regulating  powers  of 
Congress." 

The  Knight  Case.— This  same  rule  was  followed  in  United 
States  vs.  E.  C.  Knight  Co.,  60  Fed.  Rep.  934  [the  Sugar  Trust 
case]  and  the  case  was  afterward  affirmed  by  the  supreme 
court  of  the  United  States  in  156  U.  S.  1.  In  this  case  the 
Supreme  Court  decided  that  the  act  to  protect  trade  and  com- 
merce against  unlawful  restraint  and  monopolies,  July  2,  1890 
[federal  anti-trust  act],  applied  to  monopolies  in  restraint  of 
interstate  and  international  trade  or  commerce,  and  not  to 
monopolies  in  the  manufacture  even  of  a  necessary  of  life; 
that  the  intent  to  export  a  manufactured  article  to  foreign 
nations  or  to  send  it  to  another  state  did  not  determine-  the 
time  when  the  article  or  product  passed  from  the  control  of 
the  state  and  belonged  to  commerce;  and  that,  accordingly,  the 
act  did  not  apply  to  a  company  engaged  in  one  state  in  the  re- 
fining of  sugar  under  the  circumstances  detailed  in  that  case, 
because  the  refining  of  sugar  under  those  circumstances  bore  no 
distinct  relation  to  commerce  between  the  states  or  with  foreign 
nations.  In  an  opinion  in  which  eight  members  of  the  court 
concurred,  the  Supreme  Court  [Chief  Justice  Puller]  said: 

"The  argument  is  that  the  power  to  control  the  manufacture  of 
refined  sugar  is  a  monopoly  over  a  necessary  of  life,  to  the  enjoyment 
of  which  by  a  large  population  of  the  United  States  interstate  com- 
merce is  indispensable,  and  that,  therefore,  the  general  government 
in  the  exercise  of  the  power  to  regulate  commerce  may  repress 
such  monopoly  directly  and  set  aside  the  instruments  which  have 
created  it.  But  this  argument  cannot  be  confined  to  necessaries  of 
life  merely,  and  must  include  all  articles  of  general  consumption. 
Doubtless  the  power  to  control  the  manufacture  of  a  given  thing  in- 
volves in  a  certain  sense  the  control  of  its  disposition,  but  this  is  a 
secondary  and  not  a  primary  sense;  and  although  the  exercise  of 
that  power  may  result  in  bringing  the  operation  of  commerce  into 
play,  it  does  not  control  it,  and  affects  it  only  incidentally  and 
indirectly.  Commerce  succeeds  to  manufacture,  and  is  not  a  part  of 
it.  The  power  to  regulate  commerce  is  the  power  to  prescribe  the 
rule  by  which  commerce  shall  be  governed,  and  is  a  power  inde- 
pendent of  the  power  to  suppress  monopoly.  But  it  may  operate 


CERTAIN  PROPOSITIONS  SETTLED.  221 

in  repression  of  monopoly  whenever  that  comes  within  the  rules 
by  which  commerce  is  governed  or  whenever  the  transaction  is 
itself  a  monopoly  of  commerce. 

"It  is  vital  that  the  independence  of  the  commercial  power  and  of 
the  police  power,  and  the  delimitation  between  them,  however  some- 
times perplexing,  should  always  be  recognized  and  observed,  for 
while  the  one  furnishes  the  strongest  bond  of  union,  the  other  is  es- 
sential to  the  preservation  of  the  autonomy  of  the  states  as  required 
by  our  dual  form  of  government;  and  acknowledged  evils,  however, 
grave  and  urgent  they  may  appear  to  be,  had  better  be  borne  than 
the  risk  be  run,  in  the  effort  to  suppress  them,  of  more  serious  con- 
sequences by  resort  to  expedients  of  even  doubtful  constitutionality. 

"It  will  be  perceived  how  far  reaching  the  proposition  is  that  the 
power  of  dealing  with  a  monopoly  directly  may  be  exercised  by  the 
general  government  whenever  interstate  or  international  commerce 
may  be  ultimately  affected.  The  regulation  of  commerce  applies  to 
the  subjects  of  commerce  and  not  to  matters  of  internal  police.  Con- 
tracts to  buy,  sell,  or  exchange  goods  to  be  transported  among  the 
several  states,  the  transportation  and  its  instrumentalities,  and 
articles  bought,  sold,  or  exchanged  for  the  purpose  of  such  transit 
among  the  states,  or  put  in  the  way  of  transit,  may  be  regulated, 
but  this  is  because  they  form  part  of  interstate  trade  or  commerce. 
The  fact  that  an  article  is  manufactured  for  export  to  another  state 
does  not  of  itself  make  it  an  article  of  interstate  commerce,  and  the 
intent  of  the  manufacturer  does  not  determine  the  time  when  the 
article  or  product  passes  from  the  control  of  the  state  and  belongs 
to  commerce." 

These  propositions  seem  to  be  settled:  1.  The  power  of 
Congress  does  not  extend  to  preventing  contracts  and  combina- 
tions in  restraint  of  trade  and  monopolies  outside  of  the  sphere 
of  commerce  among  the  states  and  with  foreign  nations. 

2.  The  business  of  manufacturing  is  not  embraced  in  inter- 
state commerce,  and  Congress  has  no  power  to  control  or  re- 
strain aggregations  of  capital  in  the  business  of  manufacturing. 

3.  Congress  has  no  power  to  restrain  monopoly  as  such,  un- 
less it  comes  within  the  rules  by  which  commerce  is  governed, 
or  be  itself  a  monopoly  of  commerce. 

4.  Congress  cannot  limit  the  rights  of  persons  or  corpora- 
tions in  the  mere  acquisition,  control  or  disposition  of  property, 
or  regulate  the  price  at  which  such  property  should  be  sold,  or 
make  criminal  acts  of  persons  or  corporations  in  the  acquisition 
and  control  of  property  which  the  states  of  their  residence  or 
creation  sanction  or  permit. 

5.  When  commerce  begins  is  determined  not  by  the  charac- 
ter of  the  commodity  nor  the  intention  of  the  owner  to  transfer 
it  to  another  state  for  sale,  nor  by  his  preparation  of  it  for  trans- 
portation, but  by  its  actual  delivery  to  a  common  carrier  for 
transportation  or  by  the  actual  commencement  of  its  transfer 


222  TRUSTS  OR  COMPETITION f 

to  another  state.  At  that  time  the  power  to  regulate  of  the 
state  ceases  and  that  of  Congress  attaches  and  continues  until 
it  has  reached  another  state  and  becomes  mingled  with  the 
general  mass  of  property  in  the  latter  state. 

6.  Contracts  to  buy  and  sell  or  exchange  goods  to  be  trans- 
ported among  the  several  states,  the  transportation  and  its  in- 
strumentalities, and  articles  bought,  sold  or  exchanged  in  the 
business  of  such  transit  among  the  states  and  in  the  way  of 
transfer,  may  be  regulated,  because  they  form  a  part  of  inter- 
state trade  or  commerce. 

7.  The  fact  that  an  article  is  manufactured  for  export  in 
another  state  does  not  of  itself  make  it  an  article  of  interstate 
commerce.    The  intent  of  the  manufacturer  does  not  determine 
when  the  article  or  product  passes   from  the   control  of  the 
state  and  belongs  to  commerce. 

8.  The  case  of  the  Addystone  Pipe  Company  decided  that  an 
agreement   or   combination    between    corporations    engaged    in 
private  employment  which  is  not  "a  contract  to  buy,  sell  or  ex- 
change goods  to  be  transported  among  the  several  states,"  but 
which  is  intended  to  and  necessarily  does  operate  as  a  restraint 
upon  competition  in  the  sale  of  goods  in  one  state  to  be  de- 
livered from  another,  is  interstate  commerce,  or  an  obstruction 
to  such  commerce,  subject  to  regulation  by  Congress. 

If  the  Supreme  Court  affirms  this  decision,  it  does  not  clearly 
appear  that  it  would  have  any  effect  upon  (1)  the  aggregation  of 
capital  in  one  kind  of  business  by  persons  or  corporations  en- 
gaged in  private  employments,  nor  (2)  upon  the  restraint  of 
competition  necessarily  resulting  therefrom,  where  there  was  no 
agreement  or  combination.  Congress  cannot  limit  the  amount 
of  money  invested  in  one  kind  of  business.  Persons  or  corpora- 
tions would  still  have  power  to  buy,  sell  and  exchange  goods  to 
be  transported  among  the  several  states.  They  could  not  be 
compelled  to  sell  their  products  in  any  particular  territory  or  to 
any  particular  person  or  at  fixed  prices. 

Line  Between  State  and  Federal  Power.— It  is  manifest  that 
if  the  line  between  the  power  to  regulate  commerce,  which  be- 
longs to  Congress,  and  the  police  power,  which  belongs  to  the 
states,  should  be  erased  or  made  indefinite  great  confusion 
would  result. 

If  under  the  power  to  regulate  commerce— "to  prescribe  the 
rule  by  which  commerce  shall  be  governed"— Congress  had  ex- 
clusive jurisdiction  to  prescribe  the  rules  by  which  all  persons 
should  be  governed  in  making  contracts  which  may  affect  com 
merce,  the  sphere  of  local  self-government  would  be  very  much 
narrowed,  and  the  power  of  the  national  government  indefinitely 
extended. 


POWERS  OF  THE  STATE.  223 

It  should  be  noted  that  in  the  Joint  Traffic  Association  case, 
in  the  majority  opinion  it  is  said  (Supreme  Court  Reporter,  vol. 
19,  No.  3,  page  35):  "It  is  not  only  possible,  but  probable,  that 
good  sense  and  integrity  of  purpose  would  prevail  among  the 
managers  [of  railroads],  and,  while  making  no  agreement  and 
entering  into  no  combination  by  which  the  whole  railroad  inter- 
est as  herein  represented  should  act  as  one  combined  and  con- 
solidated body,  the  managers  of  each  road  might  yet  make  such 
reasonable  charges  for  the  business  done  by  it  as  the  facts 
might  justify." 

If  the  managers  of  railroads,  engaged  in  interstate  commerce, 
in  a  public  employment,  and  subject  to  regulation  by  Congress, 
each  acting  for  his  own  road  and  not  in  pursuance  of  any  con- 
tract or  combination,  may  make  such  reasonable  charges  for 
business  done  as  the  facts  may  justify,  no  reason  is  apparent 
why  persons  or  corporations  engaged  in  private  employments, 
and  not  subject  to  regulation  by  Congress,  might  not  accom- 
plish the  same  purpose,  without  any  combination  or  contract  in 
restraint  of  trade. 

It  appears  to  be  well  settled  that  the  power  of  Congress  does 
not  extend  to  preventing  contracts  or  combinations  in  restraint 
of  trade,  or  monopolies  outside  the  sphere  of  commerce  among 
the  states  and  with  foreign  nations,  although  it  may  be  difficult 
sometimes  to  draw  the  line  between  interstate  commerce  and 
the  internal  police  power  of  the  state. 

Outside  of  the  domain  of  interstate  commerce  and  of  the 
exercise  of  the  power  to  coin  money  and  regulate  the  value 
thereof,  and  of  the  power  to  pass  a  bankruptcy  law,  Congress 
has  no  power  to  control  the  making  of  contracts,  nor  to  affect 
them,  except  in  so  far  as  they  may  be  affected  by  the  exercise 
of  governmental  powers,  such  as  to  declare  war  or  make  treaties, 
or  lay  taxes,  or  in  the  exercise  of  the  power  of  eminent  domain. 

II. 

THE  POWER  OF  THE  STATE  TO  LIMIT  THE  FREEDOM  OF 
CONTRACT. 

Outside  of  the  domain  committed  by  the  constitution  to  the 
federal  government,  the  sovereignty  of  the  state  is  supreme, 
subject,  of  course,  to  the  limitations  imposed  in  the  constitution 
of  the  United  States. 

But  the  legislature  cannot  exercise  despotic,  uncontrolled  and 
arbitrary  power.  It  can  only  exercise  "legislative  power." 

Under  our  form  of  government  the  legislature  is  not  su- 


224  TRUSTS  OR  COMPETITION  f 

preme;  it  is  only  one  of  the  organs  of  that  absolute  sovereignty 
which  resides  in  the  whole  body  of  the  people.  Like  other  de- 
partments of  the  government,  it  can  only  exercise  such  powers 
as  have  been  delegated  to  it,  and  when  it  steps  beyond  that 
boundary,  its  acts,  like  those  of  the  most  humble  magistrate  in 
the  state  who  transcends  his  jurisdiction,  are  utterly  void. 

Eminent  Authorities  Quoted.— "Mr.  Justice  Story  says  (Wilk- 
inson vs.  Leland,  2  Peters  627):  'The  fundamental  maxims  of 
a  free  government  seem  to  require  that  the  rights  of  personal 
liberty  and  private  property  should  be  held  sacred.  At  least  no 
court  of  justice  in  this  country  would  be  warranted  in  assuming 
that  the  power  to  violate  and  disregard  them— a  power  so  re- 
pugnant to  the  common  principles  of  justice  and  civil  liberty — 
lurked  under  any  general  grant  of  legislative  authority,  or  ought 
to  be  implied  from  any  general  expression  of  the  will  of  the 
people.  The  people  ought  not  to  be  presumed  to  part  with 
rights  so  vital  to  their  security  and  well  being,  without  very 
strong  and  direct  expressions  of  such  an  intention.'  (See  also  2 
Kent  Com.,  13,340,  and  cases  there  cited.) 

The  security  of  life,  liberty  and  property  lies  at  the  founda- 
tion of  the  social  compact;  and  to  say  that  this  grant  of  legisla- 
tive power  includes  the  right  to  attack  private  property  is  equiv- 
alent to  saying  that  the  people  have  delegated  to  their  servants 
the  power  of  defeating  one  of  the  great  ends  for  which  the 
government  was  established."  (Taylor  vs.  Porter,  4  Hill  141- 
143.) 

No  state  shall  deprive  any  person  of  life,  liberty  or  property 
without  due  process  of  law,  nor  deny  to  any  person  equal  pro- 
tection of  the  laws. 

It  is  a  striking  illustration  of  the  manner  in  which  the  Eng- 
lish-speaking people  preserve  the  historic  continuity  of  their  de- 
velopment, that  we  find  the  language  of  the  first  great  charter 
of  English  liberty,  centuries  afterward,  incorporated  in  the  fifth 
amendment  of  the  constitution  of  the  United  States,  limiting 
the  power  of  the  federal  government,  and  three-quarters  of  a 
century  later,  in  the  fourteenth  amendment,  limiting  the  power 
of  the  states,  and  expanded  and  widened  to  embrace  equal  pro- 
tection of  the  law  to  all  persons. 

The  fact  that  no  cause  has  arisen  under  the  fifth  amendment, 
limiting  the  action  of  the  federal  government,  which  required  a 
construction  or  definition  of  the  word  "liberty,"  is  a  striking  il- 
lustration of  how  lightly  the  federal  government  has  borne  upon 
the  citizen.  But  the  same  language  contained  in  the  fourteenth 
amendment  has  been  construed,  and  will  doubtless  be  the  sub- 
ject of  many  future  adjudications. 


PREEDOM  OF  CONTRACT  DEFINED.  225 

The  word  "liberty"  embraces  the  right  to  pursue  any  liveli- 
hood or  lawful  avocation,  and  for  that  purpose  to  enter  into  all 
contracts  which  may  be  proper  and  necessary  and  essential  to 
carrying  them  out  to  a  successful  conclusion,  including  the 
right  of  acquiring,  holding  and  selling  property,  and  the  right  to 
make  all  proper  contracts  in  relation  thereto.  Allgeyer  vs.  State 
of  Louisiana.  -165  U.  S.  580;  L.  C.  P.  Co.,  Book  41,  p.  832; 
Butchers'  Union,  S.  H.  &  L.  S.  L.  Co.  vs.  Crescent  City  L.  S.  L. 
&  S.  H.  Co.,  Ill  U.  S.  746-762  (28,  585-580);  Powell  vs.  Pennsyl- 
vania, 127  U.  S.  678-684  (32,  235-256.) 

In  the  words  of  an  eminent  jurist,  Mr.  Phelps,  "A  just  free- 
dom of  contract  in  lawful  business  is  one  of  the  most  im- 
portant rights  reserved  to  the  citizen  under  the  general  term  of 
'liberty,'  for  all  human  industry  depends  upon  such  freedom  for 
its  fair  reward. 

"The  use  of  property  is  an  essential  part  of  it,  and  when 
abridged,  the  property  itself  is  taken.  Its  use  is  abridged  when 
the  owner  is  precluded  from  any  contract  that  is  necessary  or 
desirable  in  order  to  secure  to  him  a  just  compensation  for  its 
employment.  And  when  any  class  in  the  community  is  so  pre- 
cluded, it  is,  to  that  extent,  'deprived  of  the  equal  protection  of 
the  law.' " 

The  police  power  is  subject  to  the  limitations  imposed  by 
the  constitution  of  the  United  States. 

The  state  may  unquestionably,  in  the  exercise  of  its  powers 
of  sovereignty,  regulate  and  control  the  acts  and  contracts  of  its 
citizens,  but  all  legislative  acts  must  be  within  the  scope  of 
"legislative  power,"  and  they  must  be  subject  to  the  paramount 
power  of  the  constitution  of  the  United  States,  and  may  not 
violate  the  rights  secured  by  that  instrument. 

The  question  whether  in  any  particular  case  legislation  over- 
steps the  limitations  prescribed  by  the  federal  constitution  must 
be  decided  by  the  judicial  tribunal,  and  not  by  the  legislature. 

"The  courts  are  not  bound  by  mere  form,  nor  are  they  to  be 
misled  by  mere  pretenses.  They  are  at  liberty,  and  indeed  are 
under  a  solemn  duty,  to  look  at  the  substance  of  things  when- 
ever they  enter  upon  the  inquiry  whether  a  legislature  has  trans- 
cended the  limits  of  its  authority.  If,  therefore,  a  statute  pur- 
porting to  have  been  enacted  to  protect  the  pu'olic  health,  the 
public  morals  or  the  public  safety  has  no  real  or  substantial 
relation  to  those  objects,  or  is  a  palpable  invasion  of  rights  se- 
cured by  the  fundamental  law,  it  is  the  duty  of  the  courts  to  so 
adjudge,  and  thereby  give  effect  to  the  constitution."  Hugler 
vs.  Kansas,  123  U.  S.  661. 

In  the  case  of  L.  S.  &  M.  S.  Ry.  Co.  vs.  Smith,  19  Sup.  Ct. 

15 


226  TRUSTS  OR  COMPETITION* 

Rep.  No.  26,  p.  567,  it  was  said:  "This  (police)  power  must, 
however,  be  exercised  in  subordination  to  the  provisions  of  the 
federal  constitution.  If,  in  the  assumed  exercise  of  its  police 
power,  the  legislature  of  a  state  directly  and  plainly  violates  a 
provision  of  the  constitution  of  the  United  States,  such  legislation 
would  be  void. 

Where  "the  state  legislature  has  the  power  of  regu- 
lation over  the  corporations  created  by  it,  and  in  cases 
of  railroad  corporations,  the  same  power  of  regulation 
and  also  full  control  over  the  subject  of  rates  to  be 
charged  by  them  as  carriers  for  the  transportation  of  per- 
sons and  property  [within  the  boundaries  of  the  par- 
ticular state],  assuming  that  the  state  is  not  controlled  by  con- 
tract between  itself  and  the  railroad  company,  tlfc  question  is, 
how  far  does  the  authority  of  the  legislature  extend  in  a  case 
where  it  has  the  power  of  regulation,  and  also  the  right  to 
amend,  alter,  or  repeal  the  charter  of  a  company,  together  with 
a  general  power  to  legislate  upon  the  subject  of  rates  and  charges 
of  all  carriers?  It  has  no  right,  even  under  such  circumstances, 
to  take  away  or  destroy  the  property,  or  annul  the  contracts  of  a 
railroad  company  with  third  persons. 

"A  railroad  company,  although  a  quasi-public  corporation, 
and  although  it  operates  a  public  highway,  has,  nevertheless, 
rights  Which  the  legislature  cannot  take  away,  without  a  viola- 
tion of  the  federal  constitution.  As  stated  in  Smythe  vs.  Ames, 
169  U.  S.  466,  544,  18  Sup.  Ct.  418,  a  corporation  is  a  persou 
within  the  protection  of  the  fourteenth  amendment.  Although  it 
is  under  governmental  control,  that  control  must  be  exercised 
with  due  regard  to  constitutional  guarantees  for  the  protection 
of  its  property." 

As  to  Regulation  of  Rates  in  Public  Employments.— The 
state  can  regulate  and  control  corporations  or  individuals  en- 
gaged in  public  employments,  such  as  common  carriers,  grain 
elevators,  etc.,  and  can  require  that  their  services  in  such  public 
employments  shall  be  performed  for  reasonable  compensation. 
Munn  vs.  People  of  Illinois,  4  Otto,  113. 

But  it  cannot  deprive  such  persons  or  corporations  so  en- 
gaged in  public  employments  of  such  reasonable  compensation 
as  may  be  just  to  them  and  to  the  public,  under  all  the  circum- 
stances, without  due  process  of  law.  Smith  vs.  Ames,  supra. 

As  to  Private  Employments.— The  state  has  no  power  to 
compel  any  corporation  or  individual  engaged  in  private  em- 
ployment to  sell  its  property  or  services  at  a  fixed  price,  nor  can 
it  prevent  any  purchaser  from  buying  property  or  services  at 
such  price  as  may  be  agreed  on. 


LIMITS  OF  LEGISLATIVE  CONTROL.  22? 

As  to  Domestic  Corporations.— The  state  has  power  to  limit 
and  regulate  the  scope  and  operation  of  all  corporations  which 
it  may  create,  and  impose  upon  them  such  conditions  as  are 
wise  and  just. 

But  the  state  cannot  impair  the  obligation  of  contracts,  and 
a  charter  granted  to  a  corporation  is  a  contract  [between  the 
chartering  state  and  the  chartered  corporation]  and  cannot  be 
revoked  unless  the  power  of  revocation  is  reserved  in  the 
grant. 

Neither  can  it  prevent  the  aggregation  of  capital  by  an  ex- 
isting domestic  corporation  acting  within  the  scope  and  within 
the  limits  of  its  corporate  authority,  where  the  power  of  re- 
vocation of  its  charter  was  not  reserved  in  the  grant. 

As  to  Foreign  Corporations.— The  state  can  prevent  cor- 
porations formed  in  other  states  [or  countries]  from  coming  into 
or  carrying  on  business  within  its  jurisdiction,  or  it  may  let 
them  come  into  its  jurisdiction  under  such  conditions,  as  to  the 
legislature  may  seem  wise  and  just. 

As  to  what  constitutes  coming  into  and  carrying  on  business 
within  a  state,  by  a  foreign  corporation,  there  is  sharp  con- 
troversy. 

It  is  perfectly  clear,  however,  that  selling  property  by  such 
foreign  corporation  in  another  state,  to  a  citizen  of  this  state, 
is  not  coming  into  or  doing  business  within  this  state.  A  citizen 
of  Indiana  may  buy  agricultural  implements  of  a  foreign  cor- 
poration in  Illinois  or  sugar  or  oil  of  a  foreign  corporation  in 
New  York,  and  the  corporation  selling  to  such  citizen  in  its  own 
state  cannot  be  held  to  be  doing  business  in  the  state  of  Indiana. 

As  to  Trusts,  Combinations  and  Conspiracies  in  Restraint 
of  Trade  or  Competition.— The  state  has  unquestioned  power, 
within  its  boundaries,  to  make  void  all  contracts,  combinations 
or  conspiracies  in  restraint  of  trade  or  commerce,  and  to  im- 
pose penalties  upon  parties  making  such  contracts  and  entering 
into  such  combinations. 

But  where  there  is  no  combination,  conspiracy  or  agreement 
to  restrain  trade  or  commerce,  it  cannot  deprive  any  person  of 
his  liberty  or  property  by  restraining  him  from  pursuing  a  law- 
ful avocation,  or  from  making  such  contracts  in  the  acquisition, 
use,  and  disposition  of  his  property  as  may  be  necessary  to 
successfully  carry  on  any  such  pursuit. 

The  mere  fact  that  large  aggregations  of  capital  in  one  kind 
of  business  inevitably  tend  to  prevent  competition  does  not 
authorize  the  state  to  prevent  them,  where  there  is  no  contract 
or  combination  to  restrain  trade.  It  cannot  limit  the  amount 
of  capital  that  persons  engaged  in  private  employments  shall 


228  TRUSTS  OR  COMPETITION t 

employ  in  their  business,  nor  the  amount  of  products  they  shall 
ouy  or  sell,  nor  prescribe  what  prices  they  shall  pay  or  receive, 
nor  the  persons  to  whom  they  shall  sell.  It  cannot  prevent 
them  from  buying  from  foreign  corporations  in  other  states, 
nor  can  it  in  any  way  control  or  regulate  the  business  of  such 
corporations  in  other  states. 

Nor,  as  we  have  stated,  can  it  prevent  or  control  the  action  of 
domestic  corporations  acting  within  the  scope  and  limits  of 
their  corporate  authority  in  extending  their  business,  and  in- 
creasing thoir  capital,  unless  by  revoking  their  charters,  and  this 
cannot  be  done  where  such  power  of  revocation  is  not  reserved 
in  the  grant.  Nor  can  it  prevent  the  purchaser  of  property  in 
another  state  from  a  corporation  organized  under  the  laws  of 
another  state  from  importing  such  property  into  the  state  of  his 
residence,  nor  from  selling  such  property  to  other  citizens  of 
the  state  of  his  residence,  except  such  as  may  be  harmful  or 
dangerous,  and  the  sale  of  which  may  therefore  be  restrained 
under  the  police  power.  And  the  exercise  of  such  restraint  under 
the  police  power  upon  the  sale  of  products  endangering  the 
safety  of  the  public  must  be  by  a  general  law  which  deprives  no 
person  or  corporation  of  the  equal  protection  of  the  laws. 

Various  Forms  of  Trusts  and  Combinations.— Mr.  Thompson, 
In  his  Commentaries  on  the  Law  of  Corporations  (Section  6400), 
divides  the  various  schemes  under  which  these  combinations 
have  been  made  into  five  classes,  and  says  that  "they  are  all 
illegal  except  the  last  two."  (Sec.  6401.) 

"1.  In  so  far  as  they  consist  of  conspiracies  to  engross  the 
necessaries  of  life,  they  are  illegal  and  criminal,  under  the  prin- 
ciples of  the  common  law. 

"2.  They  are  illegal  as  contracts  in  general  restraint  of 
trade. 

"3.  They  are  unlawful  in  the  sense  of  being  ultra  vires, 
that  is  to  say,  in  the  sense  of  being  beyond  the  powers  of  each 
and  every  corporation  entering  into  them. 

"In  the  case  of  corporations  formed  to  render  service  to  the 
public  distributively,  such  as  railroad  companies,  gas  light  com- 
panies, etc.,  they  are  unlawful,  in  so  far  as  they  involve  at- 
tempts on  the  part  of  the  corporations  entering  into  them 
to  abnegate  their  public  duties  and  devolve  them  upon  other 
persons  or  corporations." 

The  fourth  and  fifth  classes,  which  are,  by  inference,  ad- 
mitted to  be  lawful,  are  as  follows: 

A  fourth  is  an  agreement  under  which  the  competing  cor- 
porations, without  entering  into  an  arrangement  in  the  nature 
of  a  partnership,  or  establishing  a  central  board  of  control,  agree 


LAW  OF  THE  CORPORATE  TRUST.  229 

among  themselves  that  each  is  to  take  a  certain  course  of  action, 
the  result  of  which  will  be  to  diminish  or  prevent  competition 
among  them,  and  to  maintain  certain  prices  for  the  commodity 
which  they  manufacture  and  sell. 

The  Modern  "Trust."— "5.  A  fifth  is  a  voluntary  dissolution 
of  all  the  competing  corporations,  and  the  formation  of  a  single 
corporation  under  the  statutes  of  some  state  whose  laws  are 
sufficiently  liberal  to  enable  it  to  be  done— the  new  corporation 
becoming  the  purchaser  of  all  the  properties  of  the  antecedent 
corporations,  and  the  shareholders  of  such  corporations  receiv- 
ing shares  in  the  new  corporation  upon  a  basis  agreed  upon  in 
the  scheme  of  re-incorporation." 

No  reason  has  ever  been  suggested  why  corporations  en- 
gaged in  the  same  kind  of  business,  without  entering  into  a  con- 
tract, or  conspiracy  or  combination  to  restrain  trade,  may  not 
each  for  itself  take  a  certain  course  of  action,  the  result  01' 
which  would  be  to  diminish  or  prevent  competition  or  tend  to 
maintain  reasonable  prices  for  the  services  they  render  or  for 
the  commodities  which  they  manufacture  and  sell. 

Indeed,  this  method  is  suggested  in  the  case  of  railroad  com- 
panies, in  the  language  heretofore  quoted  from  the  opinion  of 
the  Supreme  Court  in  the  Joint  Traffic  Association  case,  and 
such  course  is  characterized,  in  the  opinion  of  the  court,  as  that 
of  good  sense  and  integrity  of  purpose. 

In  the  case  of  Post  vs.  Southern  Railway  et  al.,  decided  by 
the  Supreme  Court  of  Tennessee  at  its  April  term,  it  was  held 
that  this  method  was  not  obnoxious  to  the  state  and  federal 
statutes  against  trusts  and  combinations. 

It  is  also  difficult  to  see  how  a  single  corporation,  formod 
under  the  statute  of  some  state,  whose  laws  allow  one  corpora- 
tion to  become  the  purchaser  of  the  property  or  stock  of  other 
corporations,  may  not  indefinitely  extend  its  control  over  a 
certain  kind  of  industry.  This  fifth  method,  which  is  now  being 
usually  adopted,  it  would  seem,  cannot  be  defeated,  so  long 
as  there  is  a  state  in  the  Union  whose  laws,  like  those  of  New 
Jersey  or  Delaware,  authorize  the  formation  of  such  corporations 
with  power  to  become  the  purchasers  of  the  property  of  ante- 
cedent corporations. 

In  Conclusion.— The  state  must  preserve  peace  and  enforce 
order  to  protect  the  liberty  of  all,  and  to  that  end,  and  to  pro- 
vide for  the  general  welfare,  it  may  regulate  the  acts  and  con- 
tracts of  all  persons  in  its  dominion,  including  combinations  of 
capital  and  of  labor  within  the  limitations  imposed  by  the  or- 
ganic law,  but  no  regulations  can  be  made  which  will  destroy 
or  impair  the  historic  rights  of  liberty  and  property,  upon 
which  our  present  social  order  is  based. 


230  TRUSTS  OR  COMPETITION? 

Our  modern  industrial  system  is  so  vast,  so  complicated, 
so  sensitive,  and  it  affects  so  deeply  the  interests  of  every  part 
of  the  commonwealth  in  ways  that  it  is  impossble  to  foresee  or 
predict,  that  no  man  or  body  of  men  is  wise  enough  to  com- 
prehend it  in  all  its  bearings  and  dictate  the  course  of  its  future 
development. 

There  is  no  justification  of  democracy,  except  the  firm  faith 
that  the  full  play  of  social  and  economic  laws,  under  such  regu- 
lation as  secures  liberty  to  all,  works  for  the  welfare  and  ad- 
vancement of  the  race. 


THE  COMMON  LAW. 

ITS  ORIGIN  AND  NATURE. 

The  Constitution  of  the  United  States  assumes  the  existence  of 
thirteen  distinct  state  goTernments,  over  whose  people  its  authority 
was  to  be  extended  if  ratified  by  conventions  chosen  for  the  purpose. 
Each  of  these  states  was  then  exercising  the  powers  of  government 
under  some  form  of  written  constitution,  and  that  instrument  would 
remain  unaffected  by  the  adoption  of  the  national  Constitution,  except 
in  those  particulars  in  which  the  two  would  come  in  conflict;  and  as  to 
those  the  latter  would  modify  and  control  the  former.  But  besides  this 
fundamental  law,  every  state  has  also  a  body  of  laws,  prescribing 
the  rights,  duties  and  obligations  of  persons  within  its  jurisdiction, 
and  establishing  those  minute  rules  for  the  various  relations  of  life 
which  cannot  be  properly  incorporated  in.  a  constitution,  but  must 
be  left  to  the  regulation  of  the  ordinary  law-making  power. 

By  far  the  larger  and  more  valuable  portion  of  that  body  of  laws 
consisted  of  the  common  law  of  England,  which  had  been  transplanted 
in  the  American  wilderness,  and  which  the  colonists,  now  become  an 
independent  nation,  had  found  a  shelter  of  protection  during  all  the 
long  contest  with  the  mother  country,  brought  at  last  to  so  fortunate 
a  conclusion. 

The  common  law  of  England  consisted  of  those  maxims  of  free- 
dom, order,  enterprise,  and  thrift  which  had  prevailed  in  the  conduct 
of  public  affairs,  the  management  of  private  business,  the  regulation 
of  the  domestic  institutions,  and  the  acquisition,  control,  and  transfer 
of  property  from  time  immemorial.  It  was  the  outgrowth  of  the 
habits  of  thought  and  action  of  the  people,  and  was  modified  gradually 
and  insensibly  from  time  to  time  as  those  habits  became  modified,  and 
as  civilization  advanced,  and  new  inventions  introduced  new  wants 
and  conveniences,  and  new  modes  of  business.  Springing  from  the 
very  nature  of  the  people  themselves,  and  developed  in  their  own  ex- 
perience, it  was  obviously  the  body  of  laws  best  adapted  to  their  needs, 
and  as  they  took  with  them  their  nature,  so  also  they  would  take  with 


MOGUL  STEAMSHIP  CASE.  231 

them  these  laws  whenever  they  should  transfer  their  domicile  from 
one  country  to  another. 

For  several  'hundred  years,  'however,  changes  had  from  time  to 
time  been  made  in  the  common  law  by  means  of  statutes.  Originally 
the  purpose  of  general  statutes  was  mainly  to  declare  and  reaffirm 
such  common  law  principles  as,  by  reason  of  usurpations  and  abuses, 
had  come  to  be  of  doubtful  force,  and  which,  therefore,  needed  to  be 
authoritatively  announced,  that  king  and  subject  alike  might  under- 
stand and  observe  them. 

From  the  first  the  colonists  in  America  claimed  the  benefit  and 
protection  of  the  common  law.  In  some  particulars,  however,  the 
common  law  as  then  existing  in  England  was  not  suited  to  their  con- 
dition and  circumstances  in  the  new  country,  and  those  particulars 
they  omitted  as  it  was  put  in  practice  by  them.  They  also  claimed 
the  benefit  of  such  statutes  as  from  time  to  time  had  been  enacted  in 
modification  of  this  body  of  rules. 

The  evidence  of  the  common  law  consisted  in  part  of  the  declar- 
atory statutes  we  have  mentioned,  in  part  of  the  commentaries  of 
such  men  learned  in  the  law  as  had  been  accepted  as  authority,  but 
mainly  in  the  decisions  of  the  courts  applying  t)he  law  to  actual  con- 
troversies. 

The  colonists  also  had  legislatures  of  their  own,  by  which  laws 
had  been  passed  which  were  in  force  at  the  time  of  the  separation, 
and  which  remained  unaffected  thereby.  When,  therefore,  they 
emerged  from  the  colonial  condition  into  that  of  independence,  the 
laws  which  governed  them  consisted,  first,  of  the  common  law  of 
England,  so  far  as  they  had  tacitly  adopted  it  as  suited  to  their  con- 
ditions; second,  of  the  statutes  of  England,  or  of  Great  Britain, 
amendatory  of  the  common  law,  which  they  had  in*  like  manner 
adopted;  and,  third,  of  the  colonial  statutes.  The  first  and  second 
constituted  the  American  common  law,  and  by  this  in  great  part  are 
rights  adjudged  and  wrongs  redressed  in  the  American  States  to  this 
day.— From  Cooley's  Constitutional  Limitations,  p.  32  and  following. 


THE  MOGUL  STEAMSHIP  CASE. 

This  celebrated  case  is  sometimes  cited  as  permanently 
fixing  the  attitude  of  English  law  as  favorable  to  the  utmost 
freedom  of  combination  among  competitors,  even  to  the  point 
of  practically  suppressing  competition.  Briefly,  the  facts  were 
that  several  independent  steamship  lines  doing  business  be- 
tween English  and  Asiatic  ports  combined  and  offered  to  all 
shippers  a  rebate  of  five  per  cent,  below  the  transportation 
rates  named  by  any  and  all  outside  or  competing  lines.  The 
'utent  and  effect  was  virtually  to  suppress  competition  and 


232  TRUSTS  OR  COMPETITION f 

monopolize  the  business  in  the  hands  of  the  combination.  A 
suit  was  brought  and  carried  to  the  highest  British  court  to 
disrupt  the  combination  as  involving  a  contract  in  undue 
restraint  of  trade  (Mogul  Steamship  Company  vs.  McGregor). 
The  decision  was  in  favor  of  the  combination.  It  is  contended 
by  some  trust  advocates  in  this  country  that  American  law 
should  be  made  to  conform  to  the  English,  as  interpreted  and 
applied  in  the  Mogul  Steamship  case.  Thus  far  no  such  ten- 
dency has  appeared  in  the  United  States.  In  the  Harvard  Law 
Review  Mr.  S.  C.  T.  Dodd,  solicitor  of  the  Standard  Oil  Trust, 
makes  the  following  reference  to  and  quotations  from  the 
language  of  the  English  court  in  the  case  cited: 

"If  some  of  the  modern  opinions  of  judges  in  trust  cases  are  to 
be  followed,  we  are  relegated  at  once,  by  the  statutes  referred  to, 
to  the  dark  ages  when  business  was  necessarily  carried  on  iu 
defiance  of  law.  For  instance,  in  the  Sugar  Trust  case  in  tne 
General  Term  (6  R.  &  C.  L.  J.  142),  the  court,  by  Judge  Daniels, 
reasserted  the  old  doctrines  of  the  common  law  to  their  fullest 
extent.  The  combination  was  held  to  be  illegal  for  the  reason, 
among  others,  that  'it  was  intended  to  bring  about  and  secure 
ulterior  advantages  in  the  way  of  advanced  profits  to  the  as- 
sociates.' Its  affairs  'were  to  be  so  managed  and  carried  on  as  to 
promote  the  profit  and  gain  of  the  associates'  and  'it  is  no  more 
than  just  to  infer  that  the  control  is  to  be  used  to  avoid  com- 
petition and  enhance  prices  and  in  that  manner,  as  it  is  the 
ordinary  expedient  to  that  end,  promote  the  interest  and  profit 
of  the  associates.'  This  is  a  repetition  of  the  mistake  of  cen- 
turies ago,  that  business  men  may  not  adopt  methods  which 
promote  their  interests  and  profit,  because  their  desire  for  profit 
may  cause  them  to  use  those  methods  improperly,  and  because 
their  advantage  may  tend  to  the  disadvantage  of  others.  There 
are  four  centuries  of  experience  and  wisdom  between  that  idea 
and  the  language  of  the  judges  in  Mogul  Steamship  Company  vs. 
McGregor,  to- wit:  That  'the  instinct  of  self -advancement  and  self- 
protection  is  the  very  incentive  to  trade;'  that  'to  say  that  a  man 
is  to  trade  fairly,  but  that  he  is  to  stop  short  at  any  act  which 
is  calculated  to  harm  other  tradesmen,  would  be  a  strange  and 
impossible  counsel  of  perfection;'  that  'it  is  perfectly  legitimate 
to  combine  capital  for  all  the  mere  purposes  of  trade  for  which 
capital  may,  apart  from  combination,  be  legitimately  used  in 
trade;'  that  'to  limit  combination  of  capital  when  used  for  pur- 
poses of  competition,  would  be  only  another  method  of  attemptr 


FUTURE  OF  THE  TRUST.  233 

ing  to  set  boundaries  to  the  tides;'  that  'the  object  of  acquisition 
of  gain  is  lawful  and  commendable,'  and  that  as  'competition 
exists  when  two  or  more  persons  seek  to  possess  or  to  enjoy  the 
same  thing  it  follows  that  the  success  of  one  must  be  the  failure 
of  another.' " 

MR.     BEACH    AS    TO    THE    FUTURE. 

A  leading  law  writer,  Mr.  Chas.  Risk  Beach,  Sr.,  in  his  work, 
"A  Treatise  on  Monopolies  and  Industrial  Trusts  as  Administered 
in  England  and  the  United  States  of  America,"  1898,  says: 

"From  the  foregoing  it  is  apparent  that  the  'trust,'  as  a  con- 
spiracy or  combination  for  the  purpose  of  creating  a  monopoly 
in  restraint  of  trade,  for  the  suppression  of  competition,  for  the 
limitation  of  production,  or  for  the  increase,  or  for  the  maintain- 
ing of  prices,  or  of  wages,  is  in  contravention  of  public  policy 
and  illegal.  Though  the  courts  of  this  country  are  not  in  full  ac- 
cord with  those  of  England,  and  though  the  decisions  of  the 
state  courts  are  in  a  degree  divergent,  yet  on  the  whole  there  is 
a  good  degree  of  unanimity  in  holding  that  the  'trust'  is  an  un- 
lawful organization,  and  as  such  void.  Moreover,  the  decisions 
of  the  courts  have  been  followed  by  vigorous  and  positive  statu- 
tory enactments.  Notwithstanding  these  facts,  however,  the 
'trust'  continues  to  live  and  prosper.  Hitherto  it  has  proved  to 
be  stronger  than  the  legislature  and  the  courts.  By  means  of  one 
device  or  another  it  has  managed  to  elude  the  penalties  of  the 
law.  It  has  been  able  to  escape  the  forfeiture  of  its  corporate 
privileges  and  the  confiscation  of  its  estates.  This  is  due,  how- 
ever, not  more  to  the  great  strength  of  these  organizations  than 
to  the  indifference  and  inertia  of  the  public.  When  the  people 
of  this  country  are  aroused  they  are  stronger  than  any  individual; 
stronger  than  any  and  an  business  combinations.  This  is  not  a 
prophecy  in  regard  to  the  future  of  'trusts,'  or  a  discussion  of  their 
merits.  This  work  has  to  do  with  the  law  to  which  these  organi- 
zations are  subject  It  will  appear  in  the  progress  of  the  dis- 
cussion that  the  law  is  adequate  to  the  control  of  the  'trust,'  as 
well  as  of  the  individual,  and  that  the  remedy  for  any  and  all 
existing  evils  of  this  nature,  at  least,  in  most  of  the  states, 
is  in  an  unbiased  and  faithful  administration  of  the  law." 


234  TRUSTS  OR  COMPETITION f 

VIEWS  OF  THREE  PRESIDENTS. 

President  Cleveland-  Trusts  Represent  the  "Communism  of  Pelf"— Presi- 
dent Harrison:  They  are  "Dangerous  Conspiracies  Against  the 
Public  Good  and  Should  Be  Made  the  Subject  of  Prohibitory  and 
Even  Penal  Legislation"— President  McKinley:  They  are  "Obnoxious 
to  the  Common  Law  and  the  Public  Welfare." 


In  his  message,  delivered  to  Congress  December  5,  1899,  President 
McKinley  devoted  considerable  space  to  the  Trust  question.  By 
quotations  from  messages  of  his  two  immediate  predecessors  in  office 
he  showed  a  striking  concurrence  of  presidential  opinion  in  opposi- 
tion to  the  trust  system.  He  said: 

Combinations  of  capital  organized  into  trusts  to  control  the  condi- 
tions of  trade  among  our  citizens,  to  stifle  competition,  limit  produc- 
tion and  determine  the  prices  of  products  used  and  consumed  by  the 
people,  are  justly  provoking  public  discussion,  and  should  early  claim 
the  attention  of  the  Congress. 

The  Industrial  Commission,  created  by  the  act  of  the  Congress  of 
June  18,  1898,  has  been  engaged  in  extended  hearings  upon  the  dis- 
puted questions  involved  in  the  subject  of  combinations  in  restraint 
of  trade  and  competition.  They  have  not  yet  completed  their  in- 
vestigation of  this  subject,  and  the  conclusions  and  recommendations 
at  which  they  may  arrive  are  undetermined. 

The  subject  is  one  giving  rise  to  many  divergent  views  as  to  the 
nature  and  variety  or  cause  and  extent  of  the  injuries  to  the  public 
which  may  result  from  large  combinations  concentrating  more  or 
less  numerous  enterprises  and  establishments,  which  previously  to  the 
formation  of  the  combination  were  carried  on  separately. 

It  is  universally  conceded  that  combinations  which  engross  or 
control  the  market  of  any  particular  kind  of  merchandise  or  com- 
modity necessary  to  the  general  community,  by  suppressing  natural 
and  ordinary  competition,  whereby  prices  are  nnduly  enhanced  to  the 
general  consumer,  are  obnoxious  not  only  to  the  common  law,  but 
also  to  the  public  welfare.  There  must  be  a  remedy  for  the  evils 
involved  in  such  organizations.  If  the  present  law  can  be  extended 
more  certainly  to  control  or  check  these  monopolies  or  trusts,  it 
should  be  done  without  delay.  Whatever  power  the  Congress  pos- 
sesses over  this  most  important  subject  should  be  promptly  ascer- 
tained and  asserted. 

PRESIDENT    HARRISON. 

President  Harrison  in  his  annual  message  of  December  3,  1889, 
says:  "Earnest  attention  should  be  given  by  Congress  to  a  considera- 
tion of  the  question  how  far  the  restraint  of  those  combinationis  of 
capital  commonly  called  'trusts'  is  matter  of  federal  jurisdiction. 
When  organized,  as  they  often  are,  to  crush  out  all  healthy  competi- 


THREE  PRESIDENTS  ON  THE  TRUST.  235 

tion  and  to  monopolize  the  product  ion  or  sale  of  an  article  of  com- 
merce and  general  necessity  they  are  dangerous  conspiracies  against 
the  public  good,  and  should  be  made  the  subject  of  prohibitory  and 
even  penal  legislation." 

An  act  to  protect  trade  and  commerce  against  unlaw- 
ful restraints  and  monopolies  was  passed  by  Congress  July 
2,  1890.  The  provisions  of  this  statute  are  comprehensive 
and  stringent.  It  declares  every  contract  or  combination, 
in  the  form  of  a  trust  or  otherwise,  or  conspiracy  in  restraint  of 
trade  or  commerce  among  the  several  states  or  with  foreign  nations, 
to  be  unlawful.  It  denominates  as  a  criminal  every  person  who 
makes  any  such  contract  or  engages  in  any  such  combination  or 
conspiracy,  and  provides  a  punishment  by  fine  or  imprisonment.  It 
invests  the  several  circuit  courts  of  the  United  States  with  jurisdic- 
tion to  prevent  and  restrain  violations  of  the  act,  and  makes  it  the 
duty  of  the  several  United  States  district  attorneys,  under  the  direc- 
tion of  the  attorney-general,  to  institute  proceedings  in  equity  to 
prevent  and  restrain  such  violations.  It  further  confers  upon  any 
person  who  shall  be  injured  in  his  business  or  property  by  any  other 
person  or  corporation,  by  reason  of  anything  forbidden  or  declared  to 
be  unlawful  by  the  act,  the  power  to  sue  therefor  in  any  Circuit  Court 
of  the  United  States  without  respect  to  the  amount  in  controversy, 
and  to  recover  threefold  the  damages  by  him  sustained  and  the  costs 
of  the  suit,  including  reasonable  attorney  fees.  It  will  be  perceived 
that  the  act  is  aimed  at  every  kind  of  combination  in  the  nature  of  a 
trust  or  monopoly  in  restraint  of  interstate  or  international  commerce. 

The  prosecution  by  the  United  States  of  offenses  under  the  act 
of  1890  has  been  frequently  resorted  to  in  the  Federal  Courts,  and 
notable  efforts  in  restraint  of  interstate  commerce,  such  as  the 
Trans-Missouri  Freight  Association  and  the  Joint  Traffic  Asso- 
ciation, have  been  successfully  opposed  and  suppressed. 

PRESIDENT    CLEVELAND. 

President  Cleveland  in  his  annual  message  of  December  7, 
1890 — more  than  six  years  subsequent  to  the  enactment  of  this  law — 
after  stating  the  evils  of  these  trust  combinations,  says: 

"Though  Congress  has  attempted  to  deal  with  this  matter  by 
legislation,  the  laws  passed  for  that  purpose  thus  far  have  proved 
ineffective,  not  because  of  any  lack  of  disposition  or  attempt  to 
enforce  them,  but  simply  because  the  laws  themselves  as  interpreted 
by  the  courts  do  not  reach  the  difficulty.  If  the  insufficiencies  of  ex- 
isting laws  can  be  remedied  by  further  legislation  it  should  be  done. 
The  fact  must  be  recognized,  however,  that  all  federal  legislation 
on  this  subject  may  fall  short  of  its  purpose  because  of  inherent  ob- 
stacles and  also  because  of  the  complex  character  of  our  govern- 
mental system,  which,  while  making  the  federal  authority  supremo 
within  its  sphere,  has  carefully  limited  that  sphere  by  metes  and 
bounds  which  cannot  be  transgressed.  The  decision  of  our  highest 
court  on  this  precise  question  renders  it  quite  doubtful  whether  the 
evils  of  trusts  and  monopolies  can  be  adequately  treated  through 
federal  action,  unless  they  seek  directly  and  purposely  to  include  in 


236  TRUSTS  OR  COMPETITION? 

their  objects  transportation  or  intercourse  between  states  or  between 
the  United  States  and  foreign  countries. 

"It  does  not  follow,  however,  that  this  is  the  limit  of  the  remedy 
that  may  be  applied.  Even  though  it  may  be  found  that  federal 
authority  is  not  broad  enough  to  fully  reach  the  case,  there  can  be  no 
doubt  of  the  power  of  the  several  states  to  act  effectively  in  the 
premises,  and  there  should  be  no  reason  to  doubt  their  willingness  to 
judiciously  exercise  such  power." 

FAILURE    OF    STATE    LEGISLATION. 

The  state  legislation  to  which  President  Cleveland  looked  for 
relief  from  the  evils  of  trusts  has  failed  to  accomplish  fully  that  ob- 
ject. This  is  probably  due  to  a  great  extent  to  the  fact  that  differ- 
ent states  take  different  views  as  to  the  proper  way  to  discriminate 
between  evil  and  injurious  combinations  and  those  associations 
which  are  beneficial  and  necessary  to  the  business  prosperity  of  the 
country.  The  great  diversity  of  treatment  in  different  states  arising 
from  this  cause  and  the  intimate  relations  of  all  parts  of  the  coun- 
try to  each  other  without  regarding  state  lines  in  the  conduct  of 
business  have  made  the  enforcement  of  state  laws  difficult. 

It  is  apparent  that  uniformity  of  legislation  upon  this  subject 
in  the  several  states  is  much  to  be  desired.  It  is  to  be  hoped  that 
such  uniformity  founded  in  a  wise  and  just  discrimination  between 
what  is  injurious  and  what  is  useful  and  necessary  in  business  op- 
erations may  be  obtained  and  that  means  may  be  found  for  the 
Congress  within  the  limitations  of  its  constitutional  power  so  to 
supplement  an  effective  code  of  state  legislation  as  to  make  a  com- 
plete system  of  laws  throughout  the  United  States  adequate  to 
compel  a  general  observance  of  the  salutary  rules  to  which  I  have 
referred. 

The  whole  question  is  so  important  and  far-reaching  that  I  am 
sure  no  part  of  it  will  be  lightly  considered,  but  every  phase  of 
it  will  have  the  studied  deliberation  of  the  Congress,  resulting  in 
wise  and  judicious  action. 

EFFECT    IN    WALL    STREET. 

The  Chicago  Tribune  of  December  7  contained  the  following 
special  dispatch  from  E.  W.  Harden,  its  New  York  correspondent: 

New  York,  December  6. — (Special.) — Industrial  stocks  were  sub- 
jected to  continuous  hammering  in  to-day's  stock  market.  In  nearly 
all  of  the  so-called  industrial  securities  there  were  notable  declines, 
this  notwithstanding  railroad  stocks  held  up  well  In  the  street 
there  continues  to  be  a  good  deal  of  speculation  as  to  the  probable 
course  of  Congress  in  the  matter  of  tnists,  and  the  timid  have  begun 
to  run  to  cover  on  the  belief  that  stringent  legislation  will  be  passed 
directed  against  all  combinations. 

Banks  and  trust  companies  are  showing  less  disposition  to  accept 
industrial  securities  as  collateral  for  loans.  Lenders  of  money  have 
not  been  favorably  disposed  toward  industrial  stocks  for  some  time, 
and  of  late  there  has  been  less  of  a  disposition  on  their  part  to  put 


TRUSTS  MUTUALLY  DESTRUCTIVE.  237 

out  money  on  trust  stocks.  This  has  had  much  to  do  with  the  recent 
unsettled  condition  of  the  stock  market  as  it  relates  to  industrials. 
There  has  been  a  sort  of  unwritten  rule  with  New  York  banks  and 
trust  companies  to  lend  money  only  on  mixed  collateral,  in  which 
industrial  securities  shall  m>t  form  more  than  25  per  cent,  in  value 
of  the  whole  amount  deposited.  As  the  ordinary  bank  will  not  loan 
more  than  80  per  cent,  of  the  face  value  of  collateral  deposited  it  is 
apparent  that  traders  are  discouraged  from  the  handling  of  these 
stocks  on  margin. 

The  President's  message,  in  which  he  speaks  of  the  necessity  for 
appropriate  legislation,  was  the  main  cause  for  to-day's  weakness. 
Those  whose  interests  lie  in  the  direction  of  higher  prices  for  these 
stocks  contend  the  President's  message  should  not  be  looked  upon  as 
a  factor  in  the  situation  for  the  reason  that  he  discriminates  in  his 
recommendation  between  the  combination  formed  for  the  purpose 
of  controlling  prices  and  preventing  competition  and  the  combinations 
formed  on  legitimate  lines.  All  of  the  Trust  officials  say  their  com- 
panies belong  in  the  latter  list. 


Capt.  Judson  N.  Cross,  a  leading  member  of  the  Minneapolis 
bar,  writes: 

My  ideas  concerning  the  latest  modern  trust  movement  are 
as  yet  unsettled,  crossing  and  recrossing  the  line  between  pro 
and  con  every  time  I  give  the  subject  a  review  mentally.  Of 
one  proposition,  however,  I  am  certain,  and  that  is  that  in  trade, 
commerce  and  manufacturing,  competition  is  eternal  and  will  not 
down.  As  the  force  of  this  law  has  passed  from  individuals  to 
the  corporation,  so  it  will  inevitably  be  inherited  by  the  trust 
from  the  corporation.  One  trust  will  soon  be  found  competing 
with  another.  Paraphrasing  a  certain  well-known  distich: 

E'en  Trusts  have  other  Trusts  to  bite  'em,    . 
And  so  on  through,  ad  infinltum. 

Like  individuals,  trusts  will  overreach  the  line  of  business 
safety,  will  try  to  cover  too  much  ground  and  fall,  many  of  them 
of  their  own  weight.  Not  all  kinds  of  business  have  the  physical 
and  commercial  continuity  that  characterizes  the  railroad,  for 
example,  and  therefore  cannot  serve  the  public  interests  by  con- 
solidations as  railroads  do. 


CHAPTER  IX. 
TRUST  MISCELLANY. 

The  Trust  in  Politics— The  Tariff  and  Trusts— The  Department  Store- 
Trusts  and  Organized  Labor— The  Flour-Milling  Industry— A  Voice 
From  New  England— The  St.  Louis  Anti-Trust  Conference  of  Gov- 
ernors—Views of  Governors  Sayers  and  Roosevelt— The  Populist 
Position— Bank  Sentiment— Chapter  of  Possible  History  (A.  D.  1925). 


THE  TRUST  IN  POLITICS. 

Up  to  the  close  of  the  year  1899  the  trust  question  has  not  be- 
come in  any  proper  sense  an  issue  between  political  parties,  al- 
though it  is  very  much  in  politics.  The  sentiment  of  the  people 
in  regard  to  the  trust  movement  is  not  perceptibly  influenced  by 
party  lines.  That  sentiment,  particularly  outside  of  the  great 
cities,  but  not  even  excepting  them,  is  so  nearly  unanimous  in 
opposition  to  what  the  people  understand  to  be  the  aims  and 
results  of  the  trust  system  that  no  political  party  could  stand 
for  a  moment  against  it,  and  no  party  shows  a  disposition  to 
hazard  the  attempt.  The  problem  is  so  new,  at  least  in  magni- 
tude, that  there  has  not  been  time  or  occasion  for  national  party 
conventions  to  give  much  attention  to  it,  but  with  few  exceptions 
state  conventions  of  all  parties  in  all  sections  of  the  Union 
held  since  1897,  when  the  real  trust  deluge  began,  have  spoken 
with  one  voice  against  the  trusts  or  against  their  attendant  >vils. 
There  has  naturally  been  a  wide  variety  in  the  form  and  in- 
tensity of  these  platform  utterances,  but  no  diversity  in  their 
general  direction.  It  was  to  be  expected  that  the  party  out  of 
power  would  endeavor  to  fix  some  degree  of  responsibility  for 
the  unpopular  trust  movement  on  the  party  in  power,  and  this 
attempt  has  been  made.  It  has  usually  taken  the  form  of  charg- 
ing that  the  Republican  protective  tariff  favors  and  invites  the 
formation  of  monopoly-trusts  by  preventing  or  hampering  foreign 

238 


THE  TRVST  IN  POLITICS,  239 

competition.  This  is  either  not  admitted  by  Republicans  or  an 
answer  is  given  like  that  of  Senator  Foraker  of  Ohio,  to  the 
effect  that  even  if  the  charge  were  well-grounded  it  would  still 
be  better  to  have  some  trusts  among  us  with  the  universal  pros- 
perity which  a  protective  tariff  brings,  than  to  destroy  that  pros- 
perity and  bring  back  the  former  universal  hard  times  by  adopt- 
ing low  tariff  legislation  in  order  to  demolish  the  trusts.  This 
latter  policy  is  likened  by  Republicans  to  the  farmer's  expedient 
of  burning  the  barn  and  contents  in  order  to  get  rid  of  the  rtlts; 
and  it  is  added  that,  as  there  are  other  methods  for  disposing  of 
rats,  besides  burning  valuable  barns,  so  there  are  other  methods 
of  abolishing  or  rendering  harmless  the  undesirable  trusts  be- 
sides bringing  in  free  trade  and  thus  pulling  down  the  fabric  of 
public  prosperity.  So  far  as  any  party  issue  can  grow  up  out  of 
the  trust  movement  it  is  likely  to  be  this  subordinate  or  collateral 
one  of  the  tariff. 

As  to  the  political  standing  of  the  men  who  have  boon 
most  conspicuous  in  forwarding  the  trust  movement,  there  is 
little  chance  for  gaining  partisan  advantage.  The  late  ex-Gov- 
ernor Roswell  P.  Flower  of  New  York  was,  until  his  sudden 
death  in  1899,  the  undoubted  and  acknowledged  leader  in  the 
business  of  promoting,  financing  and  defending  great  industrial 
trusts,  but  his  prominence  as  a  national  Democratic  leader  has 
not  led  anyone  to  suggest  a  Democratic  alliance  with  the  trust 
interests  in  Wall  Street.  While  no  equally  prominent  Republican 
politician  has  been  publicly  indentified  with  the  industry  of  con- 
solidating industries,  that  party,  like  the  Democratic,  is  ade- 
quately represented  among  trust  organizers  and  managers. 

As  to  responsibility  or  credit  for  the  anti-trust  legislation 
which  has  been  so  plentifully  enacted  in  state  and  nation 
no  party  capital  whatever  can  be  made  on  either  side.  The 
interstate  commerce  act  and  the  Federal  anti-trust  statute 
were  passed  by  Republican  Congresses,  the  former  having  been 
introduced  and  championed  by  Republican  Senator  Culloin,  and 
the  latter  by  Republican  Senator  Sherman,  while  each  measure 
received  the  pretty  unanimous  vote  of  Democrats  and  Republicans 
alike.  The  editor  has  ascertained  through  correspondence  with 
the  proper  authorities  in  each  case  that  the  twenty-nine  anti- 
trust laws  now  on  the  statute  books  of  as  many  different  states 
were  enacted  without  any  party  division  and  usually  with  the 
solid  support  of  both  political  parties.  In  Democratic  states  the 
Democratic  party  has  naturally  been  responsible  for  these  meas- 
ures, in  Republican  states  the  Republican,  and  as  will  be  seeii  by 


240  TRUSTS  OR  COMPETITION* 

the  list  of  these  laws  published  herein  they  are  quite  equally  di- 
vided among  Democratic  and  Republican  states.  Maine,  the  rocK- 
ribbed  Republican  state,  led  off  in  point  of  date  in  1889,  while 
Texas,  the  rather  robust  Democratic  state,  has  eclipsed  all  her 
sister  commonwealths  in  the  fullness  and  severity  of  her  pro- 
hibitory and  repressive  laws. 

It  has  been  recommended  with  earnestness,  and  from  sources 
both  intelligent  and  influential,  to  the  Republican  leaders  in  Con- 
gress, that  as  representatives  of  the  party  just  now  having  both 
opportunity  and  responsibility,  they  bring  forward  immediately 
a  resolution  proposing  an  amendment  to  the  Federal  constitution. 
It  is  suggested  that  such  proposed  amendment  should  confer  upon 
Congress  broader  powers  than  it  now  possesses  to  deal  through 
legislation  with  the  various  aspects  of  the  trust  question,  but 
particularly  to  suppress  monopolistic  combinations  or  aggregations 
attempting  to  carry  on,  business  in  more  than  one  state.  Refer- 
ence is  made,  first,  to  the  present  very  narrow  limits  of  con- 
gressional power  under  the  commerce  clause  of  the  Con- 
stitution, as  applied  by  the  United  States  Supreme  Court  iu 
the  cases  arising  under  the  Federal  anti-trust  statute;  second, 
to  the  apparent  inability  of  each  state  acting  singly  to  accom- 
plish desired  results;  and,  third,  to  the  assured  impossibility  of 
securing  harmonious  action  by  all  the  states.  It  is  then  urg»d, 
on  lower  grounds,  that  even  if  such  an  amending  resolution 
should  fail  to  receive  the  support  of  the  necessary  two-thirds 
of  each  house,  owing  possibly  to  Democratic  reluctance  to  en- 
large the  powers  of  the  Federal  government,  yet  the  formula- 
tion and  proposal  of  such  a  measure  in  good  faith  by  the  Repub- 
lican party  would  free  it  from  possible  censure,  and  fix  respon- 
sibility for  defeat  elsewhere.  One  adviser  of  the  Republican 
party  has  put  it  thus  tersely:  "The  responsible  political  party 
which  does  not  move  in  this  matter  promptly,  sincerely  and 
vigorously,  is  lost." 

Mr.  Bryan,  answering  the  question  whether  a  declaration  against 
trusts  by  both  political  parties  in  their  platforms  for  1900  would 
put  an  end  to  the  discussion,  said:  "Not  at  all,  because  the  Repub- 
lican Party  has  made  a  record  that  might  cast  suspicion  on  its  good 
intentions,  even  though  it  were  to  declare  against  trusts.  Why 
give  that  party  four  years  more  to  do  something  promised  when  the 
present  administration  has  done  nothing?" 

In  the  platform  for  1892,  on  which  Mr.  Cleveland  and  a  Demo- 
cratic Congress  were  elected  was  this  anti-trust  plank: 

"We  recognize  in  the  trusts  and  combinations  which  are  designed 
to  enable  capital  to  secure  more  than  its  just  share  of  the  joint  prod- 
uct of  capital  and  labor  a  natural  consequence  of  the  prohibitive  taxes 
which  prevent  the  free  competition  which  is  the  life  of  honest  trade, 


THE  TARIFF  AND  THE  TRUST.  241 

but  we  believe  their  worst  evils  can  be  abated  by  law,  and  we  de- 
mand the  rigid  enforcement  of  the  laws  made  to  prevent  and  control 
them,  together  with  such  further  legislation  in  restraint  of  their 
abuses  as  experience  may  show  to  be  necessary." 

Mr.  Bryan,  who  was  a  member  of  the  Ways  and  Means  Com- 
mittee of  that  Congress,  has  been  reminded  of  this  and  of  the  fact 
that  his  own  party,  when  thus  in  supreme  power,  did  nothing  to  ob- 
struct or  punish  the  trust,  and  hence  that  there  is  no  ground  for 
Democratic  criticism  of  Republican  inaction  along  the  same  line.  It 
is  retorted  that  at  the  time  when  the  Democrats  were  thus  tempo- 
rarily in  control,  there  had  not  been  sufficient  experience  with  then  ex- 
isting anti-trust  laws  to  warrant  further  and  immediate  repressive 
legislation;  that  the  Democratic  president  proved  to  be  not  in  sym- 
pathy with  the  anti-trust  attitude  of  his  party  and  platform;  hence, 
nothing  could  reasonably  have  been  expected  from  him  or  from  his 
attorney-general;  and  that  the  Democrats  now  propose  to  atone  for 
the  former  mistake  by  electing  a  president  who  will  be  a  genuine  and 
aggressive  exponent  of  his  party's  anti-monopoly  sentiment.  Mean- 
while President  McKinley's  message  of  December,  1899,  is  stalwartly 
anti-trust.  As  to  his  attorney-general — ? 

The  present  ambiguous  or  waiting  attitude  of  the  labor 
leaders  toward  the  trust  question  is  somewhat  embarrassing  to 
the  managers  of  both  political  parties.  The  rank  and  file  of 
workmen  apparently  share  fully  the  general  feeling  of  opposition 
to  trusts,  but  the  labor  union  officials  are  acting  the  part  of  op- 
portunists, and  carefully  avoiding  any  definite  commitment. 
This  attitude  characterized  their  utterances  at  the  Chicago  Trust 
Conference,  nearly  to  the  extent  of  robbing  them  of  all  signifi- 
cance. More  recently  President  Samuel  Gompers,  of  the  Ameri- 
can Federation  of  Labor,  has  published  in  the  national  organ 
of  that  order  an  adroit  article  which  is  published  herein,  und 
which  sufficiently  illustrates  what  is  here  said.  It  indicates 
that  the  leaders  of  organized  labor  are  prepared  to  make  terms 
with  the  trusts,'  and  at  least  refrain  from  joining  any  anti-trust 
crusade,  political  or  otherwise.  Whether  the  masses  of  wage 
earners  are  to  be  won  over  to  this  diplomatic  policy  remains  to 
be  seen.  If  so,  the  fact  is  likely  to  temper,  to  some  extent,  the 
anti-trust  utterances  of  all  political  parties. 


THE  TARIFF  AND  THE  TRUST. 

There  has  been  no  really  intelligent  and  helpful  discussion 
of  the  relation  of  the  tariff  to  the  various  trusts.  Free  traders 
have  made  sweeping  charges  to  the  effect  that  the  present 

16 


242  TRUSTS  OR  COMPETITION* 

tariff  is  the  cause  and  bulwark  of  nearly  all  monopolistic  trusts, 
but  Protectionists,  on  the  other  hand,  have  pointed  to  the  fact 
that  the  greatest  of  all  the  trusts,  the  Standard  Oil,  produces  a 
commodity  which  is  on  the  free  list.  President  Havemeyer  of 
the  Sugar  Trust  asserts  that  "the  tariff  is  the  mother  of  all 
trusts."  but  Mr.  Havemeyer,  himself,  represents  a  tariff-pro- 
tected trust,  which  demands  still  more  protection,  and  he  is 
scarcely  an  authority  on  political  economy. 

Undoubtedly  there  is  an  excellent  opportunity  for  the  Demo- 
cratic party  to  make  a  fresh  onslaught  on  the  protection  policy 
by  identifying  it  with  the  present  trust  movement,  and  with 
much  of  plausibility,  if  not  of  reason.  It  will  be  surprising  if 
this  attempt  is  not  made.  The  situation  is  probably  about  this: 
A  considerable  number  of  the  newer  trusts  are  either  rendered 
possible  or  are  greatly  aided  by  the  existing  tariff,  and  all  trusts 
which  have  monopolized  protected  industries  reckon  upon  the 
tariff  as  enabling  them  to  hold  prices  at  a  higher  level  than  they 
could  under  revenue  duties.  Plainly  the  Tin  Plate  Trust  could 
not  exist  for  a  day  without  a  high  duty  on  the  commodity  it  pro- 
duces. When  President  Reed  of  the  American  Tin  Plate  Com- 
pany recently  testified  before  the  Industrial  Commission,  he  was 
asked  whether  that  industry  could  have  been  consolidated  into  a 
trust,  but  for  the  tariff.  He  replied:  "There  would  have  been 
nothing  to  consolidate."  This  is  doubtless  true,  but  it  is  not 
clear  that  with  the  industry  established  as  it  now  is  a  much  lower 
duty  will  not  serve  all  legitimate  purposes.  The  National  Salt 
Company  is  another  trust  which  depends  absolutely  on  the  tariff 
for  existence,  but  it  is  also  true  that  the  American  Salt  Industry, 
except  in  the  west,  no  matter  how  owned,  would  go  to  the  wall 
but  for  a  duty  on  foreign  salt.  When  salt  is  on  the  free  list 
English  salt  is  brought  to  our  seaboard  cities  in  ballast  (freight 
free)  while  it  costs  $2  per  ton  to  transport  salt  to  our  seaboard 
from  the  nearest  producing  points  in  New  York  state.  In  regard 
to  the  general  list  of  protected  industries  which  have  been  ab- 
sorbed by  trusts,  many  insist  that  the  tariff  should  be  promptly 
lowered  all  along  the  line  to  a  point  which,  while  producing  suffi- 
cient revenue,  will  prevent  these  protected  trusts  from  earning 


TEE  DEPARTMENT  STORE.  243 

dividends  on  the  immense  volume  of  water  included  in  their 
capitalization.  Over  against  this  contention,  the  friends  of  pro- 
tection point  to  the  present  times  of  abounding  prosperity  as  re- 
sulting from  the  protective  system  embodied  in  the  Dingley  tariff 
and  protest  against  a  return  to  a  low  tariff  with  commercial  de- 
pression simply  to  hurt  the  trusts. 

This,  of  course,  is  obvious:  If  a  trust  has  a  virtual  monopoly  of 
an  industry  for  the  United  States,  a  chief  restraint  upon  it  is  the 
possibility  of  competition  from  foreign  countries.  Now  if  a  tariff 
wall  tends  to  shut  out  all  foreign  competitors,  the  higher  that 
wall  is  the  more  completely  is  foreign  competition  excluded  and 
the  more  completely  are  American  consumers  placed  and  held  at 
the  mercy  of  the  protected  American  trust. 


THE   DEPARTMENT  STORE. 

Objections  to  it  Stated— Criticisms  Answered— No  Resemblance  to  the  Trust- 
Succeeds  Because  it  Serves  the  Public— It  is  Opposed  to  Monopoly— Views 
of  Hon.  John  Wanamaker. 


Those  who  regard  the  department  store  as  an  unwholesome  and 
injurious  feature  of  recent  trade  conditions  hold  that  it  closely 
resembles  the  industrial  trust  in  its  effects  if  not  in  its  methods; 
that  it  seeks  and  tends  to  monopolize  retail  merchandising,  or  at 
least  to  concentrate  it  in  the  hands  of  a  very  few,  when  it  is  better 
for  the  public  welfare,  viewed  largely  and  in  the  long  run,  that 
traffic  of  this  nature  should  be  divided  among  many  independent 
dealers;  that  it  drives  out  of  business  thousands  of  middle-class 
merchants  and  shopkeepers,  together  with  tiheir  employes,  and  ren- 
ders but  a  fractional  and  inadequate  return  for  this  injury  to  so- 
ciety and  to  individuals  by  furnishing  employment  on  salaries  or 
wages  to  a  part  of  those  former  proprietors  whom  it  has  displaced; 
thdt  it  thus  tends  to  lower  the  level  of  our  citizenship  by  eliminating 
or  greatly  diminishing  the  number  of  independent  employing  trades- 
men and  dividing  the  mercantile  element  of  each  large  city  into 
two  classes,  consisting  on  the  one  hand  of  half  a  dozen  multi- 
millionaire owners  of  vast  department  stores,  who  have  no  need 
for  their  additional  millions  and  continue  in  business  chiefly  for  the 


244  TRUSTS  OR  COMPETITION? 

excitement  of  further  accumulation,  and  on  the  other  hand  several 
thousand  employed  persons  of  both  sexes,  parts  of  a  great  ma- 
chine, with  identity  largely  lost  and  dependent  for  continued  liveli- 
hood upon  the  continued  favor  of  intermediate  bosses,  whose  caprice, 
prejudice  or  nepotism  may  at  any  time  fiud  a  cause  for  compassing 
the  removal  of  competent  and  faithful  subordinates. 

The  other  side  is  this:  Whatever  may  be  the  merits  or  de- 
merits of  the  department  store,  and  whatever  society  may  finally 
conclude  to  do  with  it,  it  broadly  differs  from  the  trust  in  this — 
that  it  does  not  attempt  to  obtain  a  monopoly  of  trade  by  the 
artificial  device  of  purchasing  and  absorbing  all  competing  stores; 
if  it  draws  custom  from  neighboring  merchants  it  does  so  by  being 
able,  through  its  larger  facilities,  to  furnish  habitually  a  greater  serv- 
ice for  the  money  paid,  some  legitimate  advantage  in  price,  variety, 
quality  or  convenience,  or  in  all  of  these:  it  enables  its  patrons  to 
purchase  under  one  roof  practically  all  needed  commodities  from 
needles  and  coffee  to  carpets  and  pianos;  it  saves  time  and  avoids 
wear  and  tear  by  permitting  of  "one  payment,  one  delivery  and 
one  ringing  of  the  door  bell"  as  the  result  of  a  day's  shopping; 
it  has  thus  far  shown  no  tendency  to  form  combinations  with  other 
department  stores  to  shut  out  competition,  maintain  prices  or  limit 
supply;  it  cannot  and  does  not  prevent  competing  department  stores 
from  starting  and  continuing  in  the  same  field,  as  witness  the  suc- 
cessful and  unopposed  invasion  of  New  York  City,  first  by  Siegel, 
Cooper  &  Co.,  and  then  by  Wanamaker,  to  compete  with  Macey  and 
others  long  established  there;  it  cannot  and  does  not  escape  the 
keenest  actual  competition,  from  other  equally  strong  concerns; 
it  is  not  kept  on  its  good  behavior  by  "potential  competition,"  but 
by  perpetual  and  sleepless  rivalry  at  its  elbow.  A  recent  canvass 
of  St.  Louis  is  said  to  have  developed  the  fact  that  there  are  in  that 
city  as  many  small  retail  stores,  each  supporting  from  one  to  three 
independent  proprietors,  as  there  were  before  the  development  of  the 
modern  department  store.  In  any  large  city,  convenience  of  distance 
must  always  maintain  a  great  many  thrifty  stores  and  shops  not 
conducted  on  the  department  or  conglomerate  plan. 

In  Illinois  and  Missouri,  and  possibly  one  or  two  other  states, 
legislation  has  been  recently  enacted  for  levying  a  special  license 
tax  on  department  stores,  the  object  being  not  revenue,  but  the  dis- 
couragement of  the  tendency  toward  this  form  of  merchandising,  and 
the  aiding  of  ordinary  merchants  and  dealers  to  aompete  with  the 
mercantile  giants.  Cases  to  test  the  constitutionality  of  some  of 


VIEWS  OF  JOHN  WANAMAKER.  245 

these  acts  are  now  pending.  The  weight  of  legal  opinion  is  on  the 
side  of  their  unconstitutionally  on  the  ground  that  they  represent 
class  legislation  and  involve  unequal  and  unfair  taxation. 

On  December  18,  1899,  the  Supreme  Court  of  Illinois  declared 
unconstitutional  the  ordinance  of  the  Chicago  City  Council,  which 
prohibited  any  store  which  sells  dry  goods  from  also  selling  under 
the  same  roof,  provisions,  groceries  or  liquors.  The  court  held  that 
such  legislation  could  only  be  valid  when  necessary  to  protect  the 
public  health,  and  as  no  such  basis  was  claimed  in  this  case,  it  vir- 
tually deprived  the  citizen  of  his  property  without  due  process  of  law. 

In  his  recent  testimony  before  the  Industrial  Commission  (De- 
cember 9,  1899),  Hon.  John  Wanamaker  made  some  interesting 
statements  and  expressed  some  fresh  opinions  from  the  standpoint 
of  an  expert.  Briefly  summarized  his  points  were  these:  (1)  The 
department  store  has  no  other  right  to  exist  than  that  which  comes 
from  its  service  to  society.  The  rights  of  owners  of  such  establish- 
ments are  subordinate  to  the  welfare  of  the  public.  The  modern 
department  store,  properly  conducted,  is  a  distinct  benefit  to  so- 
ciety, and  its  success  is  not  secured  at  an  undue  cost  to  the  com- 
munity. While  the  ordinary  motive  of  money-making  inspire®  own- 
ers, yet  that  purpose  is  not  inconsistent  with  advantage  to  the  pub- 
lic. (2)  The  modern  department  store  is  not  an  artificial  device,  but 
a  natural  evolution  from  modern  economic  conditions.  Some  of  those 
conditions  are,  command  of  cheaper  and  more  abundant  capital, 
better  transportation  and  quicker  transmission  of  intelligence,  de- 
velopment and  concentration  of  executive  capacity,  the  evolution 
of  the  science  of  organization,  the  determination  of  producers  to 
reach  consumers  directly  and  the  tendency  of  trade  to  move  along 
the  lines  of  least  resistance.  (3)  Economy  in  the  expenditure  of 
money,  time  and  effort  measures  the  success  of  the  department  store. 
Just  in  proportion  as  these  ends  are  secured  by  it  is  it  popular  and 
successful.  Through  the  better  economic  conditions,  resulting  from 
great  concentration  and  organization  of  distribution  by  the  depart- 
ment store,  the  whole  business  is  handled  more  cheaply  and  the 
consumer  gets  the  benefit  of  this  vast  saving.  The  manufacturing 
producer  sells  and  the  department  store  buys  from  him  in  very  large 
lots;  the  former  reduces  his  risk  of  loss  and  often  wholly  saves 
his  usual  expense  of  selling.  There  are  no  intermediate  profits 
or  commissions  to  jobbers,  commission  dealers,  agents  or  other 
middlemen.  All  along  the  line  economies  result  and  there  is  every 
reason  why  the  department  store  should  reduce  retail  prices,  since 
such  reduction  represents  a  saving.  Prices  are  reduced  to  the 
consumer  very  largely.  All  of  the  reductions  in  prices  created  by  the 
producer's  or  manufacturer's  savings,  plus  th>>  reduction  in  retail 
profits  consequent  upon  the  concentration  of  large  distribution  at  a 
single  point,  should  go  to  the  consumer.  That  this  is  the  practical 
result  is  shown  in  the  low  retail  prices  that  generally  prevail. 

Upon  American  dry  goods  generally  the  retailer's  percentage 
of  profits  has  been  reduced  one-half  during  the  last  twenty  years. 


246  TRUSTS  OR  COMPETITION f 

This  is  true  upon  woolen,  silk  and  cotton  fabrics.  The  total  per 
cent  of  reduction  in  prices  to  the  consumer  cannot  be  stated  owing 
to  the  varying1  standards  of  qualities  and  taste  and  improvements 
in  manufacture.  But  the  consumer  saves  the  entire  reduction  in  the 
retailer's  profit.  It  can  also  be  stated  with  a  fair  degree  of  cer- 
tainty that  the  net  profits  of  the  great  retail  stores  vary  from  3  to  6 
per  cent  on  the  dollar  of  business  done.  Thus  it  will  appear  that 
the  modern  retail  merchant  is  giving  public  service  at  a  rate  of 
profit  so  small  as  to  be  merely  a  commission.  There  does  not  exist 
in  retail  business  any  known  combination  for  the  control  of  any 
merchandise,  nor  for  the  fixing  of  prices  either  in  the  interests  of 
merchants  or  manufacturers.  The  entire  practical  influence  of  the 
modern  department  store  is  powerfully  against  monopoly  in  any 
branch  of  manufacturing  or  selling.  Retail  merchants,  in  common 
with  the  public,  may  be  the  victims  of  combinations  to  control 
prices  and  create  profits,  but  they  are  not  and  never  have  been  par- 
ties to  such  measures.  Public  service  is  the  basic  condition  of  retail 
business  growth.  To  give  the  beet  merchandise  at  the  least  cost  is 
the  modern  retailer's  ambition.  He  cannot  control  costs  of  pro- 
duction, but  he  can  modify  costs  of  distribution  and  his  own  profits. 
His  principle  is  the  minimum  of  profit  for  the  creation  of  the  maxi- 
mum of  business.  It  is  possible  for  retail  merchants  in  several  lo- 
calities to  combine  purchases  for  the  sake  of  economy,  but  such  co- 
operation differs  widely  from  the  organization  commonly  known  as 
trusts.  Neither  would  it  affect  retail  prices,  save  to  reduce  them. 
More  than  the  total  number  of  persons  thrown  out  of  employment 
in  wholesale  and  retail  stores  by  modern  competition  find  employ- 
ment in  the  department  stores  at  increased  remuneration. 

Evidently  referring  to  'his  own  business,  Mr.  Wanainaker  said: 
"Within  its  organization  are  numerous  places  that  for  liberality  of 
compensation  would  be  more  attractive  than  90  per  cent  of  the 
presidencies  of  the  banks,  trusts  or  insurance  companies  of  the 
United  States.  It  has  places  that  pay  'Salaries  between  $5,000  and 
$20,000  a  year,  and  other  positions  that  command  between  $2,000 
and  $5,000  a  year.  This  line  of  analysis  could  be  carried  to  the 
lower  classes  of  employment  and  the  resulting  facts  would  be  in 
harmony  with  the  proposition  that  the  employes  of  the  store  in 
question  are  better  off  than  they  could  be  possibly  if  engaged  jn 
small  retail  storekeeping.  Department  stores  have  shortened  the 
hours  of  labor,  and  by  systematic  discipline  have  made  it  lighter. 
The  small  store  is  harder  upon  the  sales  person  and  clerk.  The 
effect  upon  the  character  and  capacity  of  employes  is  good.  A  well- 
ordered  modern  department  store  is  a  means  of  education  in  spelling, 
writing,  English  language,  system  and  method.  Thus  it  becomes 
to  the  ambitious  and  serious  employe,  in  a  small  way,  a  university 
in  which  character  is  broadened  by  intelligent  instruction  practically 
applied.  The  department  store  of  the  period  is  beneficial  to  so- 
ciety, and  therefore  has  a  substantial,  economic  and  moral  basis 
for  its  existence," 


VIEWS  OF  LABOR  LEADERS.  247 

TRUSTS  "AND  ORGANIZED  LABOR. 

In  the  "American  Federationist"  for  October,  1899,  Samuel 
Gompers,  president  of  the  American  Federation  of  Labor,  has  the 
following  article,  purporting  to  indicate  the  attitude  of  organized 
labor  toward  the  trusts.  It  will  be  observed  that  its  tone  is  not 
unfriendly  to  them: 

PRESIDENT  GOMPERS'  VIEW. 

A  Word  on  Trusts. — We  are  all  conscious  of  the  giant  strides 
with  which  industry  during  the  past  decade  has  combined  and  con- 
centrated into  the  modern  trust.  There  is  considerable  difference 
of  opinion,  however,  as  to  what  is  regarded  by  many  as  an  intoler- 
able evil.  Organized  labor  is  deeply  concerned  regarding  the  "swift 
and  intense  concentration  of  the  industries,"  and  realizes  that  unless 
successfully  confronted  by  an  equal  or  superior  power  there  is  eco- 
nomic danger  and  political  subjugation  in  store  for  all. 

But  organized  labor  looks  with  apprehension  at  the  many  panaceas 
and  remedies  offered  by  theorists  to  curt)  the  growth  and  development 
or  destroy  the  combinations  of  industry.  We  have  seen  those  who 
knew  little  of  statecraft  and  less  of  economics  urge  the  adoption  of 
laws  to  "regulate"  interstate  commerce  and  laws  to  "prevent"  com- 
binations and  trusts,  and  we  have  also  seen  that  these  measures, 
W!H-D  enacted,  have  been  the  vory  insfrurren's  employed  to  deprive 
labor  of  the  benefit*  of  organized  effort,  while  at  the  same  time  they 
have  simply  proven  incentives  to  more  subtly  and  surely  lubricate 
the  wheels  of  capital's  combination. 

For  our  part,  we  are  convinced  that  the  state  is  not  capable  of 
preventing  the  legitimate  development  or  natural  concentration  of 
industry.  All  the  propositions  to  do  so  which  have  come  under  our 
observation  would  beyond  doubt  react  with  greater  force  and 
injury  upon  the  working  people  of  our  country  than  upon  the 
trusts. 

The  great  wrongs  attributed  to  the  trusts  are  their  corrupting  in- 
fluence on  the  politics  of  the  country,  but  as  the  state  has  always  beeD 
the  representative  of  the  wealth  possessors  we  shall  be  compelled  to 
endure  this  evil  until  the  toilers  are  organized  and  educated  to  the  de- 
gree when  they  shall  know  that  the  state  is  by  right  theirs,  and  finally 
and  justly  come  to  their  own.  while  never  relaxing  in  their  efforts 
to  secure  the  very  best  possible  economic,  social  and  material  im- 
provement in  their  condition. 

There  is  no  tenderer  or  more  vulnerable  spot  in  the  anatomy  of 
trusts  than  their  dividend  paying  function,  there  is  no  power  on 
earth,  other  than  the  trade  unions,  which  wields  so  potent  a  weapon 
to  penetrate,  disrupt,  and,  if  necessary,  crumble  the  whole  fabric. 
This,  however,  will  not  be  necessary,  nor  will  it  occur,  for  the 
trades  unions  will  go  on  organizing,  agitating  and  educating,  in  order 
that  material  improvement  may  keep  pace  with  industrial  develop- 
ment, until  the  time  when  the  workers,  who  will  then  form  nearly 


248  TRUSTS  OR  COMPETITION? 

the  whole  people,  develop  their  ability  to  administer  the  functions  of 
government  in  the  interest  of  all. 

There  will  be  no  cataclysm,  but  a  transition  so  gentle  that  most 
men  will  wonder  how  it  all  happened. 

In  the  early  days  of  our  modern  capitalist  system,  when  the  in- 
dividual employer  was  the  rule  under  which  industry  was  conducted, 
the  individual  workmen  deemed  themselves  sufficiently  capable  to 
cope  for  their  rights;  when  industry  developed  and  employers  formed 
companies,  the  workmen  formed  unions;  when  industry  concentrated 
into  great  combinations,  the  workingmen  formed  their  national  and 
international  unions;  as  employments  became  trustified,  the  toilers 
organized  federations  of  all  unions — local,  national  and  international- 
such  as  the  American  Federation  of  Labor. 

We  shall  continue  to  organize  and  federate  the  grand  army  of 
labor,  and  with  our  mottoes,  lesser  hours  of  labor,  higher  wages, 
and  an  elevated  standard  of  life,  we  shall  establish  equal  and  exact 
justice  for  all.  "Labor  Omnia  Vincit." 

GENERAL   SECRETARY   WHITE. 
[Of  the  United  Garment  Workers  Association.] 

We  are  witnessing  a  transformation  in  business  methods  as  com- 
plete and  as  sweeping  as  the  industrial  revolution  of  a  century  ago. 
The  latter  came  as  the  result  of  scientific  progress,  and  the  present 
one  is  due  to  the  evolution  of  competitive  business.  They  were  both 
necessary  to  social  progress,  although  it  has  been  attained  at  the 
cost  of  much  suffering.  Just  as  Nature  works  out  her  ends  in  a 
large  way — without  regard  to  individual  cases — so  with  society, 
and  we  must  adjust  ourselves  to  the  change.  The  trusts  are  here 
to  stay;  we  must  look  the  situation  in  the  face  and  endeavor  to  remedy 
the  evils  which  have  come  with  them.  Now,  what  are  these  evils 
which  have  aroused  such  antagonism,  and  which  one  is  the  greatest? 
I  think  it  will  be  agreed  that  it  is  the  despotic  power  which  the 
aggregations  of  wealth  con  wield  and  by  which  courts  are  in- 
fluenced, legislatures  controlled  and  privileges  purchased.  This 
constitutes  a  real  menace.  History  and  our  own  experience  teach 
how  irresponsible  power  is  usually  abused.  The  industrial  combina- 
tions are  irresponsible,  because  individuals  who  comprise  them,  while 
sharing  in  the  profits,  disown  personal  responsibilities  for  the  man- 
agement, and  their  purposes  are  sordid,  although  they  serve  the  pur- 
pose of  society.  That  is  why  it  is  imperatively  necessary  that  they 
should  be  controlled  and  thoir  affairs  regulated  so  that  they  will  be 
confined  to  their  proper  sphere  of  activity.  This  is  the  real  problem. 

Our  legislatures,  we  know  only  too  well,  are  limited  in  their  re- 
sponsibilities. What  is  needed,  in  order  to  meet  this  new  situation, 
is  a  larger  control  over  legislation  on  the  part  of  the  people,  and  for 
that  reason  I  suggest  the  wider  extension  of  the  referendum  princi- 
ple, by  means  of  which  important  laws  would  have  to  be  sanctioned 
by  vote  of  the  people  before  going  into  effect.  The  labor  organiza- 
tions have  endorsed  the  principle,  and,  if  generally  introduced,  I 
think  it  would  tend  to  allay  the  alarm  felt  over  the  growing  power 
of  corporations.  The  effect  the  trusts  have  upon  the  middleman, 
and  the  disarrangement  they  cause,  I  regard  of  secondary  im- 


SOCIALISTIC  OUTCOME  PREDICTED.  249 

portance,  because  the  systematic  organization  of  industry,  by  means 
of  which  production  is  cheapened,  without  requiring  reduction  in 
wages,  extends  consumption  and  widens  the  opportunities  for  em- 
ployment. This  more  than  compensates  for  the  temporary  dis- 
placement which  the  economy  of  the  trust  method  makes  necessary. 
The  distinction  must  be  made  that  wherever  trusts  are  artificially 
created— through  a  monopoly  franchise,  special  privileges  and  other 
advantages — our  efforts  should  be  directed  towards  removing  the 
means  which  enable  the  corporation  to  control  the  market  other 
than  by  merit  and  superior  service.  Now,  on  this  question  it  is 
anxiously  asked— where  do  the  trades  unions  stand  V  Well,  the 
average  union  member  thinks  just  as  the  ordinary  individual  does, 
with  this  difference:  He  has  the  advantage  of  the  practical  educa- 
tion which  the  union  affords.  Its  meetings  are  really  classes  in 
political  economy.  He  is  forced  to  face  and  understand  things 
as  they  are.  He  is  not  idly  lamenting  the  past  or  worrying  about 
the  future  in  a  way  to  make  him  morbid.  This  is  particularly  true 
of  the  leaders  of  the  movement,  and  it  is  remarkable  how  the  think- 
ing men  and  the  heads  of  the  national  unions  whom  I  have  consulted 
are  agreed  as  to  the  attitude  to  take,  and  that  policy  is  to  watch 
developments  closely,  and  be  governed  by  the  attitude  of  the  trusts 
toward  their  movement;  in  the  meanwhile  to  strengthen  their  organi- 
zations so  as  to  prepare  for  any  hostile  action  and  meet  organization 
with  organization.  So  far  the  trusts  have  been  making  friendly 
advances — as,  for  instance,  in  the  case  of  the  glass  and  iron  and  steel 
trades,  where  long-term  agreements  have  been  entered  into,  and 
by  which  the  workers  share  in  some  of  the  benefits  of  the  trusts. 

The  leaders  are  fully  conscious  also  of  the  dangers  which  confront 
them  should  the  powerful  corporations,  when  they  feel  more  secure, 
attempt  to  crush  the  movement;  but  instead  of  railing  against  them, 
they  are  preparing  for  the  supreme  trial.  That  they  will  be  equal 
to  the  test,  I  have  no  doubt,  because  the  movement  for  economic 
democracy  has  proceeded  too  far  to  be  destroyed.  We  know  that 
where  workingmen  are  employed  in  larger  groups  they  can  be  more 
readily  united,  and  there  is  no  power  which  can  withstand  them 
when  animated  by  a  common  purpose.  If,  perchance,  trade  unions 
should  be  destroyed,  it  would  be  a  calamity  indeed,  because  demo- 
cratic institutions  cannot  exist  where  the  workers  are  dependent  or 
servile.  The  unions  have  their  faults,  because  they  are  composed 
of  persons  with  usual  shortcomings  and  incapacities,  but  their  great 
merit  is  this:  That  they  instill  the  spirit  of  self-help  and  create 
higher  aspirations;  they  represent  the  movement  of  the  mass  of  the 
people  for  a  larger  share  in  the  benefits  of  civilization,  and  for  a 
higher  standing  in  society.  The  very  reverses  which  they  have  met 
with  have  made  them  more  practical  and  broad-minded  and  as  a 
consequence  the  unions  have  discarded  the  visionary  agitation  which 
once  distinguished  them. 


At  the  annual  delegate  convention  of  the  American  Federation 
of  Labor,  held  in  Detroit  in  December,  1899,  the  resolutions  adopted 
took  the  position  that  the  trust  movement  cannot  be  stopped  nor 


250 

effectively  regulated;  that  it  will  develop  and  proceed  through  the 
absorption  of  one  trust  by  another,  until  practically  a  single  trust 
monopolizes  all  leading  industries,  and  then  society  will  step  in  and 
claim  its  own  by  assuming  ownership  and  control — in  other  words, 
that  socialism,  through  government  ownership  is  now  the  inevitable 
outcome  of  the  trust  contagion.  This  is  a  significant  utterance. 


THE  FLOUR-MILLING  INDUSTRY. 

The  writer  of  the  following  is  EX-GOVERNOR  JOHN  S.  PILLSBURT  of  Minnesota, 
leading  proprietor  of  the  great  Flour-Milling  Industry  of  Minneapolis.— 
THE  EDITOR. 

[Contributed.] 

OFFICE  OF  THE  PILLSBURT-WASHBURM  FLOUB  MILLS  Co. 
MINNEAPOLIS,  MINN.,  Nov.  2,  1899. 

Dear  Sir: — We  do  not  consider  the  forming  of  trusts,  as 
generally  organized,  to  be  beneficial  to  the  people  of  this  country. 
One  serious  objection  to  the  trust  is  the  issue  of  what  is  termed 
watered  or  fictitious  stock  which  does  not  represent  actual  values. 
As  is  well  known,  trusts  are  made  up  by  the  consolidation  of  eev- 
eral  concerns,  the  properties  of  which  are  put  in  at  prices  much 
beyond  their  actual  values.  The  prices  for  goods  manufactured 
must  necessarily  be  advanced  in  order  to  pay  dividends  on  the 
amount  for  which  the  trusts  are  capitalized.  For  other  reasons 
also,  prices  of  goods  manufactured  can  be  and  are  made  muoh 
higher  to  the  home  consumers  than  before  the  trusts  were  formed. 
The  parties  who  form  trusts  are  men  whose  chief  interest  Is  in 
the  profits  they  can  make.  The  managers  are  never  satisfied  with 
a  reasonable  profit,  but  are  determined  to  make  an  exorbitant 
one.  Enormous  profits  are  always  made  by  the  promoters  also, 
who  are  the  persons  chiefly  active  in  forming  the  trusts.  Afrer 
taking  their  profits,  their  interest  in  such  concerns  is  endod. 
Many  times  a  trust  is  formed  largely  of  idle  or  inferior  plants 
put  in  at  exorbitant  prices  and  kept  idle  thereafter  for  the  pur- 
pose of  controlling  the  market.  The  object  is  simply  to  destroy 
all  competition.  The  trust  of  to-day  is  simply  a  monopoly. 

It  is  claimed  that  trusts  are  beneficial  in  that  they  increase 
our  export  trade  by  being  able  to  compete  in  foreign  markets. 
Is  this  not  a  very  erroneous  reason  for  creating  trusts?  How 
can  a  trust  supply  a  foreign  market  where  it  is  obliged  both  to 
compete  with  cheaper  labor  and  to  pay  dividends  on  large  amounts 
of  stock  which  represents  fictitious  value?  With  trusts  as 
formed  in  tbese  days,  I  believe  it  to  be  a  fact  that  prices  in  every 


SENATOR  CHANDLER'S  VIEWS.  251 

instance  have  been  advanced  for  goods  made  whether  such  an 
advance  was  necessary  or  not.  Not  only  have  prices  been  ad- 
vanced, but  wages  of  labor  employed  have  often  been  reduced, 
as  instance  the  case  of  the  Linseed  Oil  Trust. 

The  Pillsbury-Washburn  Flour  Mills  Company  preemptovily 
refused  to  put  their  flour  mills  or  other  property  into  a  flour 
trust  or  to  be  a  party  to  forming  a  monopoly  in  the  Hour  tr:ide. 
We  believe  that  stupendous  flour  trust,  in  order  to  pay  higher 
dividends,  and  returns  on  the  fictitious  values  of  many  of  the 
inferior  properties  absorbed,  would  be  obliged  to  advance  the 
price  of  flour  to  consumers  and  to  reduce  the  price  of  wheat  to 
farmers— a  policy  that  this  company  would  never  countenance 
for  a  moment  The  Pillsbury-Washburn  Flour  Mills  Company 
believe  in  honorable  competition  in  all  respects,  and  we  believe 
that  we  can  pay  fair  dividends  on  our  capital  and  still  meet  all 
honorable  competition.  We  are  willing  to  purchase  our  whoat 
in  open  market  and  to  sell  our  product  at  a  fair  living  profit. 
We  do  not  rely  on  a  monopoly  in  our  business  and  we  do  not 
believe  in  the  forming  of  gigantic  trusts  in  any  business,  for,  as 
I  have  stated,  the  effect  intended  and  the  general  tendency  are 
to  reduce  the  price  of  the  raw  material  and  to  advance  the  price 
of  the  product  manufactured.  Very  respectfully, 

J.  S.  PILLSBURY. 


A  VOICE  FROM  NEW  ENGLAND. 

BY  U.  S.  SENATOR  \V.  E.  CHANDLEB,  New  Hampshire. 
[Contributed.] 

Concerning  trusts,  four  points  suggest  themselves.  (1)  What 

is  a  trust,  as  the  term  is  used  in  present  discussion?  (2)  What 

are  its  alleged  benefits?    (3)    What  are  its  evils?    (4)  How  and 
by  whom  should  they  be  suppressed? 

I. 

A  trust  is  an  association  of  separate  individuals  or  corpora- 
tions having  in  view  the  control  of  the  production  of  some  article 
of  merchandise  and  the  increase  of  price  thereof  to  the  consumer 
by  preventing  competition  in  the  sale  of  the  product.  Such  a 
trust  is  usually  made  up  of  a  combination  of  corporations,  be- 
cause neither  individuals  nor  partnerships  of  individuals  are 
willing  to  invest  sufficient  capital  in  individual  or  partnership 
enterprises  to  accomplish  the  monopoly  of  the  production  and 


252  TRUSTS  OR  COMPETITION? 

the  suppression  of  competition.  In  addition  to  trusts  composed 
of  various  corporations,  there  is  another  trust,  namely,  a  single 
corporation  of  sufficient  magnitude  to  take  control  of  the  »vhole 
production  of  the  article  of  merchandise  and  crush  out  competi- 
tion and  keep  up  the  price 

II. 

The  alleged  benefits  of  trusts  are  that  production  on  a  large 
scale  allows  the  adoption  of  improved  and  cheaper  methods,  and 
that  the  economy  of  cost  resulting  will  enable  the  producer  to 
lower  the  price  of  the  product  to  the  consumer. 

III. 

The  evils  of  trusts  are  that  they  do  not  in  fact  lower  the  price 
of  the  product  to  the  consumer.  They  may  do  so  temporarily,  but 
in  the  end  it  is  a  just  judgment  to  say  they  will  result  in  higher 
prices  than  will  be  charged  if  trusts  are  suppressed.  The  econo- 
mies resulting  from  improved  and  cheaper  methods  of  produc- 
tion undoubtedly  lessen  the  cost  of  the  article  to  the  producer. 
What  will  he  do  with  the  gain  thereby  made?  He  may  give  it 
to  the  consumer*  if  he  chooses,  or  he  may  pay  it  out  in  inoidi- 
nately  enlarged  salaries  to  the  managers  of  the  business,  or  he 
may  pay  it  in  large  dividends  to  the  capitalists  and  thus  build  up 
their  millionaire  fortunes.  What  in  all  probability  will  the  trust 
managers  do  with  the  saving  they  make  in  the  cost  of  produc- 
tion? They  are  under  no  compulsion  which  will  lead  them  to 
give  it  to  the  consumer  through  a  reduced  price,  because  there  Is 
no  competition  to  force  them  to  do  this.  Necessarily,  as  human 
nature  is  constituted,  they  will  pay  it  out  in  enormous  salaries  t) 
their  managers  or  in  huge  dividends  to  themselves.  It  must  be 
considered  a  sound  conclusion  that  if  trusts  multiply  as  they  have 
during  the  last  two  or  three  years  and  go  on  unhindered  to  full 
ascendency,  they  will  raise  the  prices  of  all  commodities  higher 
than  they  would  have  been  without  the  existence  of  the  trusts 
and  under  the1  influence  of  free  competition. 

Here  now  we  come  to  the  fundamental  and  fatal  objection  to 
trusts,  and  that  is,  that  they  are  intended  to  destroy  and  will 
destroy  competition  in  business  pursuits  in'  the  business  world, 
throughout  human  society.  The  great  foundation  of  human  pro- 
gress is  the  right  of  private  property.  The  best  condition  of 
human  society  is  equality  of  opportunity  in  the  business  world. 
Individualism  and  the  struggle  of  each  man  to  create  and  ac- 
quire property  has  helped  forward  civilization  and  prosperity  as 
no  other  agency  has  done.  This  topic  might  be  enlarged  upon 
at  any  length,  but  it  is  sufficient  now  to  assert  that  the  apposition 


METHODS  OF  TRUST  SUPPRESSION.  253 

to  trusts  is  based  upon  the  certainty  that  if  they  are  allowed 
to  flourish  unrestrictedly,  they  will  destroy  competition  as  a  busi- 
ness principle,  crush  out  individualism  and  put  the  control  of 
society,  its  property,  its  politics  and  its  government,  into  the 
hands  of  opulent  oligarchies. 

IV. 

How  are  trusts  to  be  suppressed  ?  In  the  simplest  and  easiest 
possible  method— by  the  state  legislatures  which  create  corpora- 
tions.  Trusts  will  never  be  very  dangerous  while  maintained 
only  by  individuals  or  partnerships  of  individuals.  The  powers 
and  functions  of  artificial  persons,  namely,  corporations,  arc 
necessary  to  the  success  of  huge  combinations  of  capital.  The 
state  legislatures  may  therefore  in  the  exercise  of  the  police 
power  of  the  state  and  their  general  powers  of  sovereignty  arid 
of  their  complete  discretion  to  allow  or  suppress  corporations 
within  their  borders,  proceed  to  the  suppression  of  trusts  and 
monopolies  by  passing  laws  regulating  and  controlling  the  urivi- 
leges  of  corporations.  The  national  government  does  not  charter 
corporations.  The  corporations  under  our  present  system  are 
the  creation  of  the  state  legislatures.  To  the  legislatures  the 
appeal  should  be  made  for  defense  against  the  oncoming  despot- 
ism of  trusts.  (1).  A  legislature  may  provide  that  separate  cor- 
porations shall  not  contract  with  each  other  for  the  purposes 
which  trusts  seek  to  accomplish.  (2)  The  legislature  may 
specify  the  business  which  every  corporation  shall  engage  in  and 
confine  it  to  one  subject  of  commerce.  (3)  It  may  limit  the 
capital  and  debts  of  every  corporation;  that  is  to  say,  it  may 
keep  its  size  so  small  that  it  cannot  be  dangerous  as  a  destroyer 
of  competition.  In  other  words,  a  legislature  by  suitable  penal 
statutes  can  do  all,  and  more  than  all.  that  is  necessary  to  pre- 
vent the  existence  and  operation  of  any  monopoly  consisting  of 
one  corporation,  or  of  any  trusts  and  monopolies  consisting  of  two 
or  more  corporations. 

The  national  government  has  a  broad  field  within  which  to 
suppress  corporations,  namely,  the  field  of  transportation  and 
interstate  commerce,  and  can  supplement  state  legislation  with 
powerful  effect.  The  writer  of  this  has  not  given  special  at- 
tention to  the  particular  legislation  in  state  or  nation  which 
should  be  enacted.  Mr.  Bryan  has  suggested  that  Congress 
might  prevent  a  corporation  of  any  state  from  doing  business 
in  another  state,  except  under  certain  limitations.  This  would  be 
a  most  unwise  use  of  national  power  and  an  encroachment  upon 
states  rights  to  which  even  a  strong  federalist  like  myself  would 
not  wish  to  assent.  If  Congress  can  keep  a  state  corpora- 


254 

tion  out  from  other  states  except  on  its  agreement  to  comply  with 
certain  conditions,  each'  state  can  do  the  same  thing.  If  Con- 
gress does  this  instead  of  the  state  legislature,  that  will  be  the 
beginning  of  the  end  of  states  rights,  and  old-fashioned  Demo- 
cratic principles  will  have  been  entirely  abandoned  by  the  Demo- 
cratic party. 

It  remains  to  be  said  that  it  is  folly  to  make  assaults  on  the 
tariff  in  connection  with  opposition  to  trusts.  The  tariff  is 
largely  designed1  to  protect  certain  industries  of  this  country 
which  otherwise  would  be  destroyed  by  competition  from  abroad. 
Take  the  tariff  off  woolen  goods  and  every  woolen  mill  in  the 
United  States  would  close  in  three  months.  This  would  indeed 
destroy  all  American  trusts  in  woolens,  but  it  would  do  infinite 
mischief  to  the  country  and  no  good  to  anyone,  for  the  American 
consumers  would  be  immediately  placed  at  the  mercy  of  foreign 
trusts.  To  destroy  an  industry  in  order  to  destroy  a  trust  is  rank 
folly,  when  the  real  object  should  be  to  destroy  the  trust  and 
save  the  industry.  Annihilating  the  industry  crushes  out  the 
individual  producer  just  as  completely  as  it  does  the  trust  en- 
gaged in  producing  the  article.  The  most  serious  obstacle  now 
existing  in  the  way  of  effectively  suppressing  trusts  is  the  dis- 
position of  the  Democratic  party  to  make  its  movement  against 
trusts  a  part  of  a  renewed  assault  upon  that  beneficent  system  of 
protection  by  tariff  duties  to  American  industries  and  American 
labor,  which  is  alike  the  glory,  strength  and  prosperity  of  the 
Republican  party  and  of  the  whole  United  States. 

W.   B.   CHANDLER. 
November  1,  1899. 


THE  ST.  LOUIS  ANTI-TRUST  CONFERENCE 

The  following  recommendations  were  adopted  September  21, 
1899,  by  the  Anti-Trust  Conference  of  Governors  and  Attorneys- 
Geneiral,  held  at  St.  Louis: 

The  committee  on  resolutions,  to  which  was  referred  several 
resolutions  and  papers  in  lieu  of  all  of  them,  submit  the  fol- 
lowing, with  the  recommendation  that  it  be  adopted  by  '.his 
conference:  That  we  believe  the  best  present  available  reme- 
dies be  along  the  following  lines: 

"1.  The  enactment  and  enforcement,  both  by  the  several 
states  and  the  nation,  of  legislation  that  shall  adequately  and 
fully  define  as  crimes  any  manipulation  or  restraint  of  trade 
in  any  line  of  industrial  activity,  with  provisions  for  adequate 
punishment  both  of  the  individual  or  the  corporation  that  shall 


ANTI-TRUST  CONFERENCE  OF  GOVERNORS.  255 

be  found  guilty  thereof,  punishment  to  the  corporation  to  the 
extent  of  its  dissolution. 

"2.  The  enactment  by  each  of  the  states  of  the  Union  of  legis- 
lation for  the  adequate  and  proper  control  and  regulation  of 
corporations  chartered  by  that  state,  and  we  recommend  as  effi- 
cacious a  system  of  reports  to  and  examinations  by  state  author- 
ity of  the  corporations  organized  under  its  laws,  to  the  end 
that  they  be  brought  to  a  fair  observance  of  the  laws  under 
which  they  are  created. 

"3.  The  enactment  by  each  state  of  laws  that  will  prevent 
the  entrance  of  any  foreign-created  corporation  into  its  limits 
for  any  other  purpose  than  interstate  commerce  except  on  terms  , 
that  will  put  the  foreign-created  corporation  on  a  basis  of  equal- 
ity with  the  domestic-created  corporation  of  the  state  entered 
and  subject  to  the  same  laws,  rules  and  regulations  of  the  state 
that  it  enters,  which  are  applicable  to  the  domestic  corporations 
of  that  state,  and  to  this  end  we  recommend  legislation  that 
would  make  it  mandatory  upon  corporations  seeking  to  engage 
in  business  outside  the  state  of  their  creation  that  they  procure 
licenses  from  the  foreign  state  as  a  condition  precedent  to  their 
entry  into  such  state;  such  license  to  be  granted  on  such  terms 
and  subject  to  such  restrictions  as  will  place  the  corporation 
subject  to  the  same  control,  inspection,  supervision  and  regula- 
tion as  the  domestic  corporation  of  that  state,  and  subject  to 
be  revocable  if  the  conditions  thereof  are  violated. 

"4.  The  enactment  of  state  legislation  declaring  that  a  cor- 
poration created  in  one  state  to  do  business  exclusively  in  other 
states  than  where  created  shall  be  prohibited  from  admission 
into  any  state.  This  proposition  is  supported  by  decisions  of 
the  Supreme  Courts  of  several  states,  but  we  believe  it  should 
become  legislative  enactment,  uniform  throughout  the  states. 

"5.  That  no  corporation  should  be  formed  in  whole  or  in  part 
by  another  corporation. 

"6.  That  no  corporation  shall  own  or  hold  any  stock  in 
another  corporation  engaged  in  a  similar  or  competitive  business, 
and  that  no  officer  or  director  of  a  corporation  shall  be  an  officer 
or  director  or  the  owner  of  stock  in  another  corporation  engaged 
in  a  similar  or  competitive  business,  the  object  or  result  of 
which  is  to  create  a  trust  or  monopoly. 

"7.  Recognizing  that  trusts  are  usually  composed  of  corpora- 
tions, and  that  corporations  are  but  creatures  of  the  law  and 
can  only  exist  in  the  place  of  their  creation,  and  cannot  migrate 
to  another  sovereignty  without  the  consent  of  that  sovereignty, 
and  that  this  consent  may  be  withheld  when  desired,  we  recom- 
mend as  the  sense  of  this  conference  that  each  state  pass  laws 


256  TRUSTS  OR  COMPETITION  f 

providing  that  no  corporation  which  is  a  member  of  any  pool  or 
trust  in  that  state  or  elsewhere  can  do  business  in  that  state. 

"8.  That  it  is  the  sense  of  this  conference  that  all  the  capi- 
tal stock  of  private  corporations  should  be  fully  paid,  either 
first,  in  lawful  money,  or  second,  in  property  of  the  actual  cash 
value  of  the  amount  of  the  capital  stock.  And  that  in  all  pri- 
vate corporations  with  a  capital  stock  issued  in  excess  of  the 
amount  actually  paid  up,  as  above  provided,  the  shareholders 
shall  be  liable  to  the  extent  of  twice  the  face  value  of  the 
stock  held  by  each." 

COMMENT  BY  GOVERNOR  SAVERS  OF  TEXAS. 

Next  to  the  war  itself  and  to  the  incidents  directly  connected 
with  it,  the  wonderful  revolution  that  has  occurred  in  business 
life  is  calculated  to  arouse  the  greatest  anxiety  in  all  thoughtful 
minds.  For  the  past  quarter  of  a  century  we  have  heard  much 
of  trust  formation,  and  notes  of  alarm  have  sounded,  again  and 
again,  to  warn  the  people  of  the  danger  that  threatens  them 
in  that  direction.  But  during  the  past  two  years  that  which 
was  previously  but  a  shadow  on  the  horizon  has  become  a  dark 
and  portentous  cloud,  and  on  every  side  and  from  every  quarter 
are  heard  warnings  of  imminent  danger  that  should  no  longer 
pass  unheeded. 

Certainly,  these  aggregations  of  capital  in  £>uch  extraordinary 
and  unprecedented  amounts,  controlling,  as  they  do,  the  production, 
distribution  and  sale  of  commodities  in  universal  use,  all  under  the 
management  and  direction  of  a  few  persons,  cannot  but  excite  gray- 
est apprehension  in  the  mind  of  every  thoughtful  and  patriotic  citi- 
zen. The  power  \yhich  such  associations  can  and  do  exert  does  not 
accord  with  the  spirit  and  policy  of  free  institutions.  The  possession 
of  extensive  authority,  supplemented  with  the  means  for  its  arbi- 
trary and  unrestrained  exercise  is  always  denied  in  every  just  and 
well  regulated  government.  This  principle  holds  equally  good  in 
matters  affecting  industrial  and  economic  life,  where  government 
has  conceded  privileges  to  one  or  few  individuals  that  are  not  en- 
joyed by  all.  Every  combination  and  association  of  any  magnitude 
in  this  country  under  the  name  or  guise  of  a  trust,  almost  without 
exception,  owes  its  existence  to  a  governmental  grant  of  privilege, 
exemption  and  power.  In  this  form  of  business  activity  the  individ- 
ual very  rarely,  if  ever,  ventures  his  entire  wealth  and  credit,  but 
shields  himself  under  the  protecting  advantage  and  immunity  of  a 
corporate  existence1,  created  by  statute. 

Were  it  not  so.  trust  formations  would  be  fewer  in  number, 
smaller  in  magnitude  and  less  dangerous  to  society.  The  tact  that 
the  trust  almost  universally  owes  its  very  life  to  the  creative  power 
of  public  authority,  makes  it  the  imperative  duty  of  government  to 
protect  the  people  against  any  abuse  or  misuse  of  its  opportunities 
to  the  detriment  of  the  general  welfare.  This  is,  in  my  opinion, 


COMMENTS  BY  GOVERNOR  SAVERS.  257 

a  complete  answer  to  any  objection  that  might  be  urged  against 
governmental  interference  to  restrain  and,  if  needs  be,  to  entirely 
destroy  the  trust  power  whenever  it  shall  have  become  hurtful  or 
perilous. 

The  character  of  our  government  increases  the  difficulty  of  a 
prompt  and  proper  solution. 

Constitutional  obstacles  lie  in  the  way  and  the  evil  can  not  be 
eradicated  by  either  federal  or  state  authority  acting  singly.  There 
must  be  co-operation  between  both  governments — general  and  local 
— each  working  earnestly  and  sincerely  within  its  own  sphere.  The 
causes  of  the  evil  must  be  sought  for,  and  when  found  must  be 
removed.  There  appears  to  be  a  difference  among  intelligent  and 
patriotic  men  as  to  how  the  subject  should  be  dealt  with.  One  class 
of  thinkers  attributes  the  trust  to  federal  legislation  only  and  con- 
tends that  relief  is  to  be  found  exclusively  in  the  halls  of  Congress. 
Another  class  ascribes  it  to  the  policy  of  the  states  in  the  too 
liberal  allowance  of  chartered  rights  and  privileges  for  purposes 
that  can  not  be  considered  public  in  their  nature. 

Those  who  are  familiar  with  the  delay  of  Congress  in  accom- 
plishing reforms,  will  not  allow  themselves  to  be  lulled  into  the 
belief  that  nothing  must  be  done  through  local  legislation  to  over- 
come the  great  and  acknowledged  evil  that  is  to  be  considered  by  this 
conference; 

Again,  however  willing,  Congress  can  only  proceed  to  a  certain 
extent  in  granting  the  desired  relief. 

The  rights  of  the  states,  as  interpreted  by  the  federal  constitu- 
tion, will  not  permit  a  trespass  upon  the  domain  of  local  authority, 
and  there  are  questions  involved  that  must  be  determined  by  the 
Legislatures.  Much  of  the  trust  power,  it  must  be  admitted,  is  due 
to  corporate  organization,  and  this  is  in  turn  indebted  for  its  existence 
to  local  legislation. 

The  conclusion,  it  occurs  to  me,  is  inevitable  that  in  order  to 
successfully  meet  this  threatening  danger,  both  the  Congress  and 
the  Legislature — supplemented  by  the  active,  earnest  and  sincere  ef- 
forts of  executive  authority  and  of  an  able,  patriotic  and  incorrupti- 
ble judiciary — must  be  called  into  contribution,  and  each  must  be 
required  to  do  its  part  under  constitutional  limitations  and  entire  har- 
mony with  th«  other.  This  movement  cannot  rightfully  be  construed 
as  a  war  against  capital.  Far  from  it.  Capital  must  be  protected 
against  its  own  unhallowed  aggressions,  or  it  will  surely  suffer  the 
death  of  the  suicide.  It  cannot  be  justly  held  an  act  of  hostility  to 
capital  for  the  law  to  say  to  the  strong  and  unscrupulous  that  the 
weak  must  not  be  destroyed. 

In  making  the  few,  who  are  so  situated  as  to  control  large  ag- 
gregations of  money  to  know  that  such  control  shall  not  be  ex- 
ercised to  the  injury  of  the  people  and  of  their  institutions,  war 
is  not  declared  against  capital. 


17 


2.->8  TRUSTS  OR  COMPETITION  f 

SOME  TRADE  COMBINATIONS  IN  ENGLAND. 

The  Birmingham  Plan  of  Combination  and  Cooperation— A  Minimum  Wage 
and  Minimum  Selling  Price— >io  Monopoly  At teoipted— Trades  Union- 
ism Encouraged — Cut-throat  Competition  Stopped— Coercion  Applied 
to  Objectors— Spread  of  the  System — Weak  Points  Developed— Some 
Pointed  Criticisms. 

During  the  past  few  years,  and  notably  since  1896,  there  has 
developed  in  Great  Britain  an  economic  and  industrial  movement 
as  unique  as  it  appears  to  be  important.  It  seems  to  have  no  specific 
name,  but  inasmuch  as  it  has  had  its  origin  and  best  demonstration  in 
Birmingham,  and  Mr.  E.  J.  Smith,  who  devised  and  first  applied  it  is  a 
Birmingham  manufacturer,  it  may  as  well  be  identified  as  the  Birm- 
ingham Flan  of  Combination  with  Co-operation.  It  has  already 
earned  a  reputation  for  great  success  in  practice,  is  being  widely 
adopted  by  various  manufacturing  industries  in  England,  and  IB 
profoundly  stirring  economic  thought  and  interest  in  Great  Britain 
and  elsewhere.  It  is  regarded  by  not  a  few  statesmen,  economists, 
manufacturers  and  representative  workingmen  abroad  as  furnishing 
a  substantial  and  permanent  remedy  for  the  immeasurable  evils 
heretofore  wrought  by  destructive  competitive  warfare  among  mana- 
facturers  and  the  resulting  industrial  warfare  between  often,  hard 
pressed  manufacturers  and  their  discontented  employees. 

In  a  nutshell  the  method  is  this:  The  manufacturers  in  a  given 
line,  being  tired  of  the  war  basis  of  doing  business,  meet  in  Con- 
ference, and  enter  into  an  alliance  offensive  and  defensive.  They 
bind  themselves  not  to  sell  without  previous  consent  of  the  alliance 
committee  below  a  certain  scale  of  minimum  prices,  which  is  always 
above  cost  as  carefully  ascertained.  They  take  their  workmen  into 
their  counsels  and  confidence,  and  these  bind  themselves  not  to  work 
for  any  employer  who  cuts  scale  prices.  The  manufacturers  are 
attracted  and  held  to  the  new  plan  by  fixing  prices  high  enough  to 
give  satisfactory  profits.  The  men  are  attracted  and  held  by  an 
automatic  system  of  profit-sharing,  with  arbitration  and  other  benefits. 
The  whole  combination  is  held  together,  first,  by  honorable  observance 
of  the  agreement;  and,  second,  by  a  sharp-eyed  committee  which  per- 
mits no  rate-cutting  or  other  breaches  of  faith.  The  door  is  open 
for  every  manufacturer  present  and  prospective  to  enter  the  alliance 
on  easy  terms,  and  a  competitor  who  remains  outside  and  cuts  prices 
is  fought  by  the  well-known  trade  methods  and  otherwise  coerced  into 
submission. 

(1)  When  a  trade  desires  to  form  an  alliance,  the  first  step  is 
to  ascertain  most  carefully  and  conclusively  the  "actual  costs  of  pro- 
duction." Political  economists  have  stated  that  these  are  known, 
to  very  few  manufacturers.  Mr.  Smith  is  of  a  similar  opinion.  In 


COMBINATION  WITH  CO-OPERATION.  259 

certain  industries,  where  there  is  a  great  deal  of  intricacy  in  the 
manipulation  of  the  raw  materials  and  the  manufactured  article,  it 
requires  considerable  scientific  knowledge  and  patient  work  to  ascer- 
tain costs. 

Having  ascertained  this  element  of  cost,  then  to  prevent  manu- 
facturing being  carried  on  at  a  loss,  a  minimum  price  scale  is  adopted. 
A  representative  article,  like  a  certain  pattern  of  bedstead  or  one 
dozen  plates  of  a  given  size  and  shape,  is  taken  as  a  basis  to  ascer- 
tain how  much  it  costs  to  manufacture;  the  manufacturers  agree  on 
the  minimum  rate  at  which  it  can  be  made;  then  a  certain  percentage 
is  added  for  profit,  and  this  forms  the  minimum  selling  price  for  that 
article.  The  manufacturers  bind  themselves,  by  the  rules  of  the 
alliance,  not  to  sell,  without  the  consent  of  the  alliance,  below  this 
minimum  price.  The  workmen  are  also  offered  certain  interests  in 
the  success  of  the  business,  and,  both  parties  being  mutually  de- 
pendent, there  is  no  occasion  for  strikes,  lockouts  or  trade  disputes. 

No  Monopoly  Attempted. — Monopoly  and  monopolistic  tendencies 
or  prices  are  claimed  to  be  rendered  impossible  by  the  fact  that  the 
door  is  left  open  to  every  one.  No  restrictions  are  placed  upon  the 
admission  of  any  reputable  candidate  for  admission  to  an  alliance. 

This  policy  of  the  open  door  makes  it  certain  that  enough  new 
concerns  will  enter  business,  under  the  favorable  conditions  fur- 
nished, to  prevent  excessive  profits.  Besides,  all  members  of  an 
alliance  are  at  liberty  to  compete  with  each  other  down  to  the  level 
of  the  minimum  scale  agreed  on.  Each  manufacturer  keeps  his  own 
traveling  men  in  the  field,  and  pushes  his  business  as  interestedly  as 
though  there  were  no  combination — for  there  is  no  pooling  of  results 
and  each  manufacturer's  success  depends  as  before  on  his  own 
energy  and  effort,  and  the  merit  of  his  methods  and  his  goods. 

The  ordinary  expenses  of  management  are  met  by  quarterly 
levies  on  the  associated  manufacturers. 

Inducements  to  the  Employees.— (a)  The  wages,  hours  and  condi- 
tions of  labor  existing  at  the  time  the  employers'  alliance  is  com- 
pleted are  guaranteed  as  Ion?  as  the  alliance  lasts,  (b)  A  wages  and 
conciliation  board  is  formed,  in  which  the  workmen  have  an  equal 
rteht  in  every  way.  This  board  has  absolute  power  to  settle  :m 
deputes  which  cnnnot  be  arranged  in  the  respective  works,  on  terms 
in  keeping  with  the  rules  of  each  alliance.  Any  extraordinary  con- 
ditions already  existing  nt  date  of  forming  an  alliance  may  bo 
thought  before' the  board  for  friendly  advice,  but  it  has  no  power  to 
insist  upon  changes.  But  in  all  new  questions  its  power  is  absolute; 
and  if  an  agreement  cannot  be  reached,  an  arbitrator  is  called  in, 
v-hose  decision  must  be  accepted  by  both  parties.  So  far.  an 
nrbitrator  has  never  been  needed.  Until  the  dispute  is  settled,  the 
workmen  accent  the  employers'  terms  under  protest.  When  the 
ruestion  is  settled  by  the  board,  the  decision  is  retroactive,  so  that 
the  delay  necessary  to  adjust  the  matter  is  not  proiudicial  to  cither 
party.  Strikes  and  lockouts  are  thus  made  impossible. 

Trades-Unionism  Fully  Supported.— The  employers,  having  formed 
a  union  amongst  themselves,  give  their  support  to  trades-unionism  in 
every  way.  They  employ  none  but  unionists,  so  that  the  workmen 


260  TRUSTS  OR  COMPETITION? 

must  form  a  union  if  none  exists.  On  the  other  hand,  the  workmen 
refuse  to  work  for  any  but  associated  employers.  If,  therefore,  any 
member  of  an  alliance  leaves  or  is  expelled  for  any  just  reason,  his 
workmen  must  leave  his  employment.  While  such  a  dispute  lasts,  the 
cost  is  shared  equally  between  the  two  associations. 

During  the  past  two  years  such  writers  as  Sidney  Webb,  Profes- 
sors of  Oxford  and  Cambridge  Universities,  and  several  eminent  po- 
litical economists  of  the  continent  of  Europe  have  been  studying  the 
working  of  Mr.  Smith's  plan,  and  have  written  him  in  approval  of  it. 
Recently  Secretary  Hay  of  our  Department  of  State,  sent  a  repre- 
sentative to  Birmingham  to  investigate,  as  did  also  the  German 
Emperor.  In  Denmark,  Canada,  New  Zealand  and  Australia  the 
movement  is  said  to  be  taking  root.  Mr.  Smith  expresses  disapproval 
of  the  modern  American  trust  system,  believing  that  it  is  based  on 
a  wrong  principle  and  tends  to  destroy  individuality  and  cause  over- 
capitalization, with  resulting  injustice  to  the  public  and  unsafety  to 
the  industries  themselves.  Every  one  of  the  52  manufacturers  in 
the  country  is  in  the  alliance.  Prices  have  been  advanced  to  the 
profit-producing  point  and  the  workmen  in  the  entire  industry  are 
regularly  receiving  a  bonus  of  about  30  per  cent  on  the  wages  which 
they  were  receiving  when  the  organization  was  formed,  and  strikes 
or  other  serious  frictions  are  unknown.  Mr.  Smith  is  now  kept  busy, 
as  an  employed  expert,  helping  to  organize  other  industries  than  his 
own.  Directly  and  indirectly  his  movement  now  affects  more  than 
30,000  operatives,  500  employers  and  stockholders  representing  $75,- 
000,000  of  capital.  He  expresses  the  opinion  that  in  less  than  ten 
years  nearly  all  the  factories  of  England  will  be  running  under  the 
new  system. 

At  the  recent  Chicago  trust  conference  Mr.  A.  W.  Still,  a 
Birmingham  editor,  contributed  a  paper  in  which  he  vigorously  at- 
tacked Mr.  Smith's  system  of  trade  combination.  His  main  criticisms 
were:  (1)  That  the  plan  involves  monopoly  of  rather  an  offensive  sort; 
(2)  that,  largely  because  of  the  successive  bonuses  or  indirect  in- 
creases of  wages  to  workmen,  it  has  been  necessary  to  nearly  double 
the  selling  prices  of  bedsteads,  which  is  the  particular  industry  in 
which  Mr.  Smith  is  interested;  (3)  this  exorbitant  advance  in  prices 
is  oppressive  to  consumers,  and  has  naturally  and  greatly  stimulated 
outside  competition  and  enormous  expenditure  has  been  necessary 
to  resist  this  rivalry;  (4)  the  high  prices  have  also  led  to  extensive 
secret  underselling  by  members  of  the  association  and  additional 
large  expenditures  have  been  necessary  to  detect  and  punish  these 
infractions  of  rules;  (5)  and  finally  several  leading  concerns  have 
withdrawn  from  the  Smith  Alliance  because  they  were  unwilling 
longer  to  participate  in  the  agreed  methods  of  coercing  or  "clubbing" 
competitors  into  joining  the  combination.  Some  of  the  Smith  trade 
combinations,  Mr.  Still  contends,  show  signs  of  dissolutfon  because  of 
these  inseparable  evils. 


SENATOR  MARION  BUTLER.  261 

THE  POPULIST  POSITION. 

Hon.  Marion  Butler,  U.  S.  Senator  for  North  Carolina,  speak- 
ing for  the  Populist  party  or  element  which  he  represents,  au- 
thorizes the  following  summary  of  his  views  for  this  volume: 

First  remarking  that  both  President  Cleveland  and  President 
McKinley  have  fruitlessly  gone  out  of  their  way  to  warn  the 
country  in  official  utterances  against  the  aggressions  of  the 
Trusts,  which  everybody  denounces  and  nobody  obstructs,  and 
that  the  Republican  party  and  the  Democratic  party  have  in  suc- 
cession enacted  Federal  anti-trust  statutes,  the  Senator  declares 
that  so  far  all  such  legislation  has  been  both  insincere  and  futile 
—akin  to  an  attempt  to  cure  cancer  with  a  sticking  plaster,  in- 
stead of  removing  from  the  blood  the  poison  that  produces  the 
cancer.  He  submits  that  the  only  rational  and  effective  way  to 
remove  trusts  is  by  removing  the  causes  that  produce  them.  The 
prime  cause  of  trusts,  he  declares  to  be  this:  The  American 
people  have  permitted  the  capitalists  and  trust-ouilders  to  get 
and  keep  control  of  the  three  great  instruments  of  commerce- 
Money,  Transportation  and  the  means  of  Transmitting  Intelli- 
gence— in  other  words,  the  Currency,  the  Railways  and  the  Tele- 
graph. 

These  three  great  instruments  of  commerce  are  the  all-power- 
ful agencies  in  the  industrial  world.  For  individual  and  inde- 
pendent business  enterprises  to  spring  up  and  prosper  it  is  indis- 
pensable that  every  man  and  every  business  should  have  an  equal 
opportunity  to  use  these  vital  instruments  of  commerce  on  the 
same  terms  as  his  competitors.  Therefore  these  agencies  should 
not  be  in  the  hands  of  those  who  could  use  them  to  discriminate 
to  destroy  competition.  The  men  in  any  country  who  control 
these  instruments  of  commerce  will  thereby  hold  the  fate  of  all 
the  people  in  their  hands  and  will  become  more  powerful  than 
the  Government  itself— indeed,  will  own  and  run  the  Govern- 
ment. Therefore,  those  life-giving  or  death-dealing  instruments 
of  commerce  should  be  the  property  or  under  the  control  of  all 
the  people,  open  to  all  alike  on  equal  terms. 

But  with  this  trinity  of  natural  monopolies  in  the  control  of 
a  few  dozen  multi-millionaires  with  their  retinue  of  satellites, 
urged  on  by  the  quenchless  greed  of  gain  and  invited  by  oppor- 
tunities and  rewards  surpassing  the  dreams  of  avarice,  trusts 
are  not  only  possible,  but  inevitable  in  every  line  of  trade,  In- 
dustry and  finance. 


262  TRUSTS  OR  COMPETITION* 

They  are  the  three  mother  trusts— the  trust  on  money,  the 
trust  on  transportation  and  the  trust  on  transmission  of  intelli- 
gence— and  the  few  manipulators  of  these  trusts  have  the  power 
to  put  any  and  every  business  into  a  trust  at  will.  During  the 
last  few  years  the  American  public  have  had  almost  every  day 
striking  object  lessons  of  the  truth  of  this  statement.  What  is 
the  result?  To-day  the  few  men  who  own  and  control  the  nation's 
instruments  of  commerce  practically  own  and  control  every  busi- 
ness enterprise  in  the  nation.  Competition  is  dead,  and  75,000,000 
of  people  are  at  the  mercy  of  a  handful  of  rapacious  plutocrats. 
This  condition  is  here  and  here  to  stay  until  the  people  arouse 
from  their  lethargy,  assert  their  power  and  resume  control  of 
the  three  agencies  which  are  omnipotent  in  the  business  world. 
"Resume  control"  is  used  advisedly.  When  the  founders  of  this 
republic  were  doing  their  almost  inspired  work,  they  reserved 
to  the  people  absolute  control  and  management  of  the  three 
potential  instrumentalities  referred  to,  as  they  then  existed,  thus 
establishing  a  precedent  and  principle  capable  of  adaptation  to 
any  changes  which  time  and  development  might  bring.  The  cir- 
culating medium  was  made  promptly  responsive  to  popular 
needs.  Transportation  was  then  represented  by  the  wagon-road 
and  water-ways  and  the  privilege  of  their  use  was  made  the  prop- 
erty of  the  public  and  the  equal  convenience  of  all.  The  trans- 
mission of  intelligence  was  solely  by  written  or  printed  communi- 
cations and  accordingly  the  postal  service  monopoly  was  made 
a  government  function  and  has  so  continued.  But  when  the 
steam  railway  for  all  commercial  purposes  supplanted  the  wagon- 
road  and  water-ways,  evil  counsels  prevailed  and  instead  of  being 
made  public  highways  for  the  equal  convenience  of  all  citizens  on 
equal  terms,  these  natural  monopolies  unnaturally  fell  into  pri- 
vate ownership  and  the  personal  control  of  the  few.  When  the 
telegraph,  for  all  effective  and  practical  purposes  in  business 
and  in  the  gathering  and  distributing  of  public  intelligence,  re- 
placed the  mails,  evil  counsels  again  prevailed  and  "private  en- 
terprise" was  once  more  permitted  to  usurp  the  place  of  the  sov- 
ereign, the  people,  and  to-day  this  tremendous  engine  of  influence 
and  power,  the  pulse-throb  of  seventy-five  miluons  of  dwellers 
in  the  greater  republic,  is  absolutely  controlled  by  five  men,  who 
are  practically  accountable  to  no  superior.  In  an  evil  and  un- 
guarded hour  the  control  of  the  volume  of  our  money  passed 
into  the  hands  of  a  foreign  banking  ring.  In  railway  transporta- 
tion, one  man,  J.  P.  Morgan  of  New  York,  representing  a  Hebrew 
syndicate  in  London,  is  master  of  75,000  miles  of  road  in  the 
United  States,  and  sitting  at  a  table  in  Wall  Street  with  a  dozen 
associates  or  subordinates,  can  any  day  raise  or  lower  freight  or 
passenger  tariffs  throughout  the  continent,  discriminate  for  or 


.      OOVERNOR  ROOSEVELT'S  VIEWS.  263 

against  any  section,  interest  or  individual,  build  up  one  com- 
munity and  crush  another.  So  long  as  this  is  true,  and  so  long 
as  a  trust  or  an  allied  group  of  trusts,  by  controlling  the  tele- 
graph, can  at  will  suppress  the  truth,  promulgate  commercial 
fiction,  color  facts  and  edit  the  news  columns  of  great  journals, 
there  is  no  hope  or  prospect  of  freeing  the  country  from  the  grip 
of  the  Trust  octopus.  Return  the  three  puissant  instruments  of 
commerce— money,  transportation  and  the  transmission  of  in- 
telligence—to the  hands  of  the  people,  where  they  have  always  be- 
longed, and  trusts  and  combines  will  surely  retire,  just  as  the 
tentacles  of  the  devil-fish  relax  their  hold  when  the  monster  is 
thrust  through  a  vital  part, 


GOVERNOR  THEODORE  ROOSEVELT. 

In  his  speech  at  Akron,  September  23,  1899.  opening  the 
political  campaign  for  the  Republicans  in  Ohio,  Governor  Roose- 
velt spoke  as  follows  in  relation  to  the  trust  issue  as  presented 
in  that  state: 

Our  opponents  [the  Democratic  party  in  Ohio]  denounce 
trusts.  But  they  propose  not  one  remedy  that  would  not  make 
the  situation  ten  times  worse  than  now.  I  have  read  through 
carefully  the  speeches  of  Mr.  Bryan  and  of  his  fellows  to  find  out 
what  they  propose  to  do.  I  have  found  plenty  of  vague  denuncia- 
tion. I  have  not  found  so  much  as  an  attempt  to  formulate  a 
national  policy  of  relief.  In  the  Democratic  platform  in  Ohio, 
just  two  measures  of  relief  are  proposed — the  first,  that  you 
should  change  the  tariff  because  it  favors  trusts;  and  the  second, 
that  you  should  coin  silver  in  the  ratio  of  16  to  1  without  regard 
to  the  action  of  any  other  nation. 

The  two  remedies  our  opponents  propose— altering  the  tariff 
and  debasing  the  currency — could  have  no  possible  effect  in 
abating  the  evils  of  the  trusts,  and  could  hurt  those  who  profit 
by  the  trusts  only  to  the  extent  that  they  hurt  every  member 
of  the  American  business  community,  from  the  capitalist  to  the 
day  laborer. 

The  Republican  Remedy.— Our  opponents  say  we  Republicans 
have  no  remedial  plan.  We  have.  We  propose  to  meet  the  prob- 
lem in  the  only  way  in  which  it  can  be  met.  by  cool  and  careful 
study,  by  finding  out  what  the  facts  are,  and  then  by  exhausting 
every  legitimate  power,  legislative,  administrative,  and  judicial, 
to  regulate  the  industrial  movement,  and  to  cut  out  all  abuses. 
Corporations  (for  what  we  commonly  call  trusts  are  generally 


264  TRUSTS  OR  COMPETITION' 

merely  big  corporations)  render  great  services,  and  are  indis- 
pensable instruments  of  industry  in  our  modern  life,  but  their 
growth  has  been  accompanied  by  the  growth  of  evils,  which  we 
can  but  remedy  by  common  sense  and  common  honesty— not 
demagogic  outcry. 

More  definitely  our  plan  is,  as  a  first  step,  to  try  the  effect 
of  publicity,  and  then  to  supplement  publicity  by  taxation,  and 
then  by  licensing  or  whatever  measure  experience  shows  to  be 
effective.  Before  hitting  we  must  know  exactly  what  we  are 
hitting  at,  and  whether  the  blow  will  hurt  more  than  it  helps. 
The  first  thing  to  do  is  to  provide  for  full  investigation  of  and 
exhaustive  report  on  all  these  corporations,  especially  all  the  cor- 
porations which  have  grown  to  be  of  such  dimensions  as  to  con- 
trol any  considerable  portion  of  a  given  trade,  industry,  or 
product— in  short,  those  corporations  which  we  mean  when  we 
speak  of  trusts.  The  mere  letting  in  of  the  light  will  in  itself 
cure  many  evils,  especially  those  of  overcapitalization,  and  the 
undue  suppression  of  competition,  and,  as  for  the  evils  that 
remain,  when  once  we  can  see  them  clearly  and  distinctly,  the 
remedy  can  readily  be  devised  without  entailing  upon  the  inno- 
cent the  misery  that  will  surely  follow  any  blind  and  ignorant 
attempt  to  smash  parts  of  our  modern  industrial  machinery,  with- 
out taking  the  trouble  to  find  out  their  relations  to  our  industrial 
life  itself. 

Let  us  find  out  every  important  detail,  of  the  business  of  the 
great  corporations  examined,  the  amount  of  stock,  the  amount 
of  bonds,  the  terms  upon  which  issued,  the  salaries  of  the  highest 
employes,  the  wages  and  aggregate  of  wages  paid  to  the  others, 
the  output  of  the  product,  and  the  price  at  which  it  is  sold,  so 
that  in  each  case  we  may  find  whether  the  combination  has 
resulted  in  raising  or  diminishing  production,  prices  and  wages, 
and,  in  short,  learn  every  detail  which  will  show  exactly  what  the 
process  has  been.  Especially  let  us  find  out  whether  the  trusts 
have  any  unduly  favored  relations  with  great  transportation 
companies,  whether  favors  are  shown  them  that  are  not  shown 
their  smaller  competitors,  in  violation  of  fair  play  and  of  the 
spirit  of  our  interstate  commerce  legislation.  Let  us  find  out 
the  facts  fully,  and  then  let  us  act  on  these  facts,  by  legislative 
or  executive  action. 


BANK  SENTIMENT. 

Outside  of  the  large  cities  of  the  Atlantic  seaboard  the 
attitude  of  banks  and  bankers  is  very  generally  in  accord  with 
that  of  the  communities  which  they  serve,  namely,  in  opposi- 


VOICE  OF  THE  SUGAIt  TRUST.  265 

tion  to  trusts.  On  October  11,  1899,  at  the  annual  convention 
of  the  Ohio  Bankers'  Association  held  at  Columbus,  a  resolution 
was  adopted  to  the  effect  that  the  convention  "views  with  regret 
the  tendency  toward  combinations  of  industries,  especially  when 
these  combinations  are  organized  on  an  unsound  basis." 

About  the  same  date  the  Illinois  Bankers'  Association  held  ir$ 
annual  convention  in  Chicago  and  in  the  course  of  his  opening 
address  the  president,  John  L.  Hamilton,  used  the  following 
language,  with  the  evident  approval  of  the  convention: 

This  country  is  becoming  alarmed  over  the  rapid  development  of 
manufacturing  and  mercantile  trusts,  and  there  is  certainly  ground 
for  alarm.  It  does  not  seem  right  and  proper,  this  consolidation  of 
industries  into  one  gigantic  organization  for  the  control  of  any  par- 
ticular line  of  business.  It  was  no  doubt  brought  about  in  many  of 
the  first  organizations  for  the  reason  that  the  plants  as  they  were 
then  being  run  were  not  paying  dividends  upon  their  investments. 
The  success  of  these  first  combinations  has  opened  up  a  new  field  to 
the  promoter  and  with  the  returning  era  of  prosperity  capital  has 
come  from  its  hiding  and  it  has  been  possible  to  float  almost  any 
kind  of  an  enterprise,  regardless  of  its  real  merits. 

The  consolidation  of  enterprises  is  working  an  injury  to  the 
banker,  for  it  is  driving  many  enterprises  out  of  existence,  thus 
crippling  the  earning  capacity  of  our  banks.  Yet  it  would  seem  that 
the  trust  remains  largely  to  be  solved  by  the  banker  himself,  for 
its  success  depends  largely  upon,  the  credit  that  is  given  to  its  stocks 
and  bonds  as  collateral  security.  The  prudent  banker,  however, 
will  see  in  these  overcapitalized  trust  organizations  an  imminent 
danger  for  the  future  along  financial  lines.  The  great  surplus  of 
money  at  the  present  time  finds  the  avenues  of  employment  limited. 
These  trust  companies  promise  rich  returns  to  the  investors  in  their 
watered  stocks.  Money  cannot  lie  idle  while  its  owner  needs  the 
interest  for  the  maintenance  of  himself  and  family.  Thus  these  se- 
curities are  finding  a  ready  sale.  But  when  the  water  is  squeezed 
out  and  the  real  values  are  thus  known  will  come  the  haste  to 
realize,  values  will  rapidly  fall,  collateral  values  will  disappear,  as 
the  banks  will  not  carry  them,  and  we  shall  have  a  financial  con- 
dition surcharged  with  the  elements  that  may  produce  a  widespread 
financial  panic.  The  investment  in  these  bewildering  mijlious  of 
trust  combination  securities  seems  to  me  to  be  the  financial  cioud 
in  the  future.  

PRESIDENT    HAVEMEYER. 

Henry  O.  Havemeyer,  President  of  the  Sugar  Trust,  testifying 
before  the  Industrial  Commission,  June  13,  1899: 

The  mother  of  all  trusts  is  the  customs  tariff  bill.  The  existing 
bill  and  the  preceding  one  have  been  the  occasion  of  the  formation 
of  all  the  large  trusts  with  very  few  exceptions,  inasmuch  as  they 


2u6  TRUSTS  OR  COMPETITION f 

provide  for  an  inordinate  protection  to  all  the  interests  of  the 
country — sugar  refining  excepted.  Economic  advantages  incident  to 
the  consolidation  of  large  interests  in  the  same  line  of  business  are 
a  great  incentive  to  their  formation,  but  these  bear  a  very  insig- 
nificant proportion  to  the  advantages  granted  in  the  way  of  protec- 
tion uiider  the  customs  tariff.  There  probably  is  not  an  industry  that 
requires  a  protection  of  more  than  10  per  cent  ad  valorem,  and  it  is 
to  obtain  what  is  provided  over  such  precentages  in  the  tariff  that 
leads  to  the  formation  of  what  are  commonly  spoken  of  as  "trusts." 
With  a  protection  to  an  industry  not  exceeding  10  per  cent,  all 
menace  to  the  community  by  trusts  would  cease.  This  10  per  cent 
would  represent  the  difference  in  cost  of  production,  and  likewise 
act  as  a  protection  against  surface  products  of  foreign  countries 
being  dumped  in  our  local  markets,  thereby  interfering  with  the 
regular  and  economic  working  of  our  industries.  Any  advantages 
that  might  then  accrue  to  such  combinations  they  would  be  fully  en- 
titled to,  and  the  public  would  not  be  damaged  thereby,  as  any 
expansion  of  price  would  be  met  by  foreign  competition  and  relief. 
I  have  said  that  sugar  was  an  exception.  The  rate  of  protection  on 
sugar  is  an  eighth  of  one  cent  per  pound,  which  is  about  'Al/z  per  cent 
ad  valorem,  and  does  not  equal  the  difference  in  the  cost  of  refining 
between  this  and  foreign  countries.  The  least  it  should  have  is 
8  per  cent,  or,  in  specific  figures,  one-fourth  of  one  cent  per  pound. 
The  sugar  refining  industry  of  this  country,  no  matter  of  what  form 
its  organization,  is  entitled  to  adequate  protection  if  any  industry  is. 
There  are  at  least  100,000  people  dependent  upon  it.  What  it  pays, 
or  has  paid,  to  its  stockholders  in  the  past  represents  nothing  more 
than  a  fair  return  on  the  capital  invested,  considering  the  extent 
of  the  business.  We  don't  lay  much  stress  on  benefit  to  the  con- 
sumer. We  are  in  this  for  business.  We  try  to  keep  the  price  down 
to  keep  out  competition.  We  are  in  competition  now,  though,  up 
to  our  throats. 


A  CHAPTER  OF  POSSIBLE  HISTORY. 

A  Backward  Glance— Rise  and  Decline  of  the  Trust  System— Vision  of  an 
Optimistic  Pessimist— Alleged  Glimpse  Beneath  the  Lid  of  Pan- 
dora's Box— A  Taste  of  Socialism— An  Untimely  Interruption— All's 
Well  That  Ends  Well. 


WASHINGTON,  D.  C.,  UNIVERSITY  OP  UNIVERSITIES,  March  — ,  1925 

CLASS-ROOM  OP  ECONOMIC  HISTORY. 

Professor.— "Gentlemen,  I  promised  you  that  I  would  de- 
vote part  of  the  class  hour  to-day  to  a  rapid  review  of  the 
rise  and  decline  of  the  monopoly-trust  system  which  fastened 
itself  upon  the  industries  of  this  country  about  the  close  of  the 
last  century,  and  of  the  successive  steps  by  which  the  nation 
freed  itself  from  that  economic  incubus. 


A  CHAPTER  OF  POSSIBLE  HISTORY.  267 

"First,  then,  bear  in  mind  that  the  suddenness  and  magni- 
tude of  the  attempted  revolution  at  first  bewildered  many.  But 
from  the  moment  that  the  real  nature  of  the  movement  became 
known,  the  mass  of  the  people,  who  were  not  in  the  trusts  and 
who  had  some  stake  in  the  permanence  of  the  social  order,  with 
that  instinctive  common  sense  which  leads  them  aright  in  most 
emergencies,  realized  that  they  were  face  to  face  with  a  great 
peril.  As  to  the  extent  of  that  peril  and  the  course  to  be  pur- 
sued in  view  of  it,  the  widest  diversity  of  view  prevailed. 

"Then  followed  what  has  come  to  be  known  as  the  Great 
Debate,  in  which  all  classes  and  both  sexes,  from  ocean  to 
ocean,  joined  with  the  keenest  interest  but  with  singular  free- 
dom from  acrimony  considering  the  strenuous  nature  of  the 
controversy.  For  a  time  not  a  few  so-called  leaders  of  opinion, 
both  in  and  out  of  Congress  and  State  Legislatures,  were  quite 
at  a  loss  what  to  do  or  say,  and  so  they  maintained  an  evasive 
silence  or  alternately  blew  hot  and  cold,  now  denouncing  the 
trusts  and  now  with  equal  energy  denouncing  any  proposed 
remedy  against  them,  while  waiting  to  see  which  way  the 
economic  and  the  political  cat  would  respectively  jump.  These 
gentlemen  concurred  in  deprecating  certain  possible  abuses  of 
the  power  admitted  to  be  possessed  by  the  new  monopolies,  and 
they  agreed  in  calling  loudly  for  "regulation"  by  law,  but  they 
were  equally  and  curiously  sterile  in  definite  suggestions  which 
had  in  them  aught  of  practical  sense  or  value.  Naturally  all 
this  was  quite  satisfactory  to  the  trusts,  which  coolly  ignored 
what  their  champions  called  the  'public  clatter,'  and  quietly 
went  on  consolidating  their  power  and  fortifying  their  position. 

"As  the  wide  debate  progressed  public  opinion  became 
aligned  somewhat  in  this  manner:  Nearly  all  who  were  pe- 
cuniarily interested  directly  or  indirectly  in  any  of  the  trusts, 
and  they  formed  an  important  section  of  the  population,  to- 
gether with  a  considerable  body  of  intelligent  and  high-minded 
citizens  whose  views  were  wholly  impartial,  including  some 
students  of  political  science,  held  that  the  monopoly-trust  was 
a  natural  result  of  economic  evolution,  the  inevitable  culmina- 
tion of  progressive  enlargement  of  plants  and  capitals,  in  the 
interest  of  greater  efficiency  and  economy  in  production,  that 
its  abolition  was  impossible  even  if  desirable,  and  undesirable 
even  if  possible;  that,  like  any  other  great  business  movement, 
this  undoubtedly  required  reasonable  regulation  and  control  for 
the  protection  of  the  people  against  any  serious  misuse  of  ad- 
vantage. On  the  other  side  it  was  stoutly  insisted  that  the 
trust  system  was  artificial,  unscientific,  and,  worst  of  all,  an  in- 
solent invasion  of  popular  rights;  that  instead  of  requiring  regu- 
lation or  palliation  it  called  for  extirpation  through  a  prompt 


268  TRUSTS  OR  COMPETITION? 

return  to  reasonable  competitive  methods.  Of  adequate  ways 
and  means  of  relief,  however,  none  were  in  sight. 

"Meanwhile,  with  conviction  confirmed  on  the  part  of  the 
trusts  that  their  position  was  legally  and  economically  im- 
pregnable, results  ensued  which  had  been  predicted  as  early 
as  1899.  As  the  managers  of  trusts  became  more  sure  of  their 
ground  and  less  sensitive  to  public  criticism,  and  as  all  talk  of 
serious  competition  died  away,  trust  prices  for  manufactured 
goods  were  progressively  placed  and  held  sharply  above  the 
level  at  which  competition  would  have  fixed  them,  and  prices 
paid  by  the  trusts  for  raw  materials  were  held  correspondingly 
low,  competition  from  foreign  buyers  in  some  lines  being  the 
only  downward  limit.  Thus  monopoly  profits  were  made  both 
coming  and  going,  while  farmers  and  other  producers  of  raw 
materials  were  mulcted  both  on  prices  of  their  sales  and  of 
their  purchases.  The  gradual  concentration  of  trust  industrial 
plants  at  the  East  and  in  the  environs  of  great  cities  in  the 
Central  states  went  noiselessly  forward.  No  new  factories,  no 
enlargements  of  existing  ones  and  no  rebuilding  of  destroyed 
ones  were  observed  in  the  towns  and  minor  cities  of  the  Cen- 
tral, Western  and  Southern  states.  Closed  and  dismantled  fac- 
tories throughout  these  sections  were  popularly  known  as  trust 
monuments. 

"The  scores  of  thousands  of  bright  young  men  annually 
turned  out  from  American  universities,  colleges,  academies  and 
technical  schools,  found  their  opportunities  in  life  reduced  by 
one-half,  thus  introducing  the  element  of  a  peculiar  pathos  into 
a  situation  already  sufficiently  strained.  For,  not  only  were 
most  of  the  avenues  to  an  honorable  industrial  career  closed  by 
the  great  change  but  the  new  method  to  an  almost  equal  extent 
diminished  opportunities  in  all  professions  which  in  any  way 
depended  for  prosperity  on  a  prosperous  middle  class  in  the 
community.  Of  course,  this  result  was  not  intended  by  anyone 
but  was  the  unavoidable  result  of  an  evil  principle  in  action. 
Politics,  municipal,  state  and  national,  became  honeycombed 
with  trust  influence,  and  wherever  it  appeared  it  carried  degra- 
dation and  demoralization.  The  trust  magnates,  when  corrupt- 
ing voters  and  legislatures,  insisted  that  they  were  simply  acting 
in  self-defense— 'protecting  the  property  interests  of  their  share- 
holders against  attacks  of  socialistic  demagogues  and  their 
dupes.' 

"All  restraints  and  popular  safeguards  seeming  to  be  removed, 
the  contagion  of  monopoly  spread  throughout  society  even  into 
fields  where  it  could  not  possibly  get  a  permanent  foothold  and 
where  its  grotesque  presence  would  have  seemed  ludicrous  but 
for  its  short-lived  outrages  upon  the  defenseless  community.  Sim- 


LONGEVITY  OF  THE  TRUST  SYSTEM.  269 

ply  as  one  of  many  examples  of  the  widespread  demoralization, 
in  looking  over  newspaper  files  of  that  period,  I  notice  that  in 
1899  in  the  second  city  of  the  country  all  the  dealers  in 
plumbers'  material  entered  into  a  monopoly  'combine'  with  the 
organized  plumbers  for  a  purpose  which  you  will  understand 
when  I  state  its  method  of  operation:  First,  no  citizen,  not  a 
plumber,  was  permitted  to  buy  any  article  of  plumbing  material 
from  any  dealer.  On  attempting  to  do  so  the  astonished  citizen 
was  referred  to  'his  plumber.'  Thus,  if  a  low-salaried  suburban 
householder  wished  to  economize  by  making  for  himself  some 
trifling  repair  to  his  kitchen  sink,  costing  for  material  perhaps 
fifty  cents,  he  was  compelled,  through  inability  to  procure  a  bit 
of  lead  pipe,  to  employ  a  plumber,  possibly  with  a  helper,  to 
come  from  the  city  and  do  the  job;  thus  practically  using  up  a 
working  day  and  involving  an  expense  of  five  to  ten  times  the 
necessary  outlay.  Second,  if  the  owner  of  a  building  under  con- 
struction happened  to  have  and  wished  to  utilize  some  second- 
hand piping  which  he  had  saved  from  the  former  structure,  he 
was  informed  by  the  boss  plumber  that  his  men  would  not 
be  allowed  to  put  it  in  place.  He  must  buy  new  pipe  from 
the  dealer. 

"One  event  greatly  disappointed  the  people  and  surprised 
many  students  of  political  economy:  When  some  of  the  worst- 
managed  and  most  absurdly  overcapitalized  trusts,  after  strug- 
gling to  pay  interest  and  dividends  on  their  inflated  valuations, 
began  to  show  signs  of  distress  and  approaching  dissolution 
there  was  a  general  hope  and  expectation  that  to  a  great  extent 
a  solution  of  the  trust  problem  might  be  at  hand— that  as  the 
trust  system  had  been  inaugurated  in  violation  of  sound  eco- 
nomic laws,  so  now  those  laws  were  about  to  avenge  themselves 
and  apply  their  own  remedy,  as  natural  and  economic  laws 
have  a  habit  of  doing.  But  a  curious  phenomenon  appaared. 
The  same  class  of  promoters  and  promoting  bankers  who  were 
mainly  responsible  for  the  original  trust  system  and  who  had 
gathered  great  fortunes  from  what  came  to  be  known  as  the 
'Industry  of  Monopolizing  Industries,'  having  unloaded  their 
trust  securities,  now  reappeared  with  unimpaired  appetites  and 
started  what  also  came  to  be  called  on  the  street  the  'Industry 
of  Wrecking  and  Reorganizing  Monopoly-Trusts.'  Employing 
as  before  the  keenest  legal  wits  that  money  could  secure,  these 
gientlemen,  knowing  all  the  ins  and  outs,  undertook  the  business 
of  closing  down,  liquidating,  reorganizing  and  recapitalizing  on 
a  reduced  basis  these  collapsed  concerns.  Thus,  instead  of  each 
failed  trust  breaking  up  into  its  original  units,  or  even  into 
independent  groups,  and  reviving  some  measure  of  effective 
competition,  the  monopolistic  feature  was  in  every  case  strenu- 


270  TRUSTS  OR  COMPETITION  f 

ously  preserved,  as  the  most  valuable  asset  in  the  reorganized 
trust,  and  the  monopoly  system  went  forward  with  simply  a 
change  of  capital  and  corporate  name.  This  result  might  have 
been  foreseen  by  those  who  recalled  the  fact  that  early  in  the 
new  movement  the  so-called  Cordage  Trust  was  twice  wrecked 
and  reorganized  but  each  time,  in  the  language  of  the  street, 
emerged  a  "water-tight  and  copper-fastened  monopoly."  A  still 
more  significant  development  was  that  scores  of  the  weak  and 
the  mismanaged  trusts  were  absorbed  by  the  successful  ones, 
the  tendency  thus  being  to  merge  all  trusts  into  one,  or,  what 
was  much  the  same,  into  a  single  close  syndicate. 

"For  a  considerable  period  many  excellent  and  usually  in- 
telligent people  were  misled  into  a  partial  support,  or  at  least 
a  toleration,  of  the  trusts  by  a  group  of  skillful  and  plausible 
writers  on  political  science,  who  could  see  no  faults  or  dangers  in 
the  trusts,  and  whose  style  of  argument  was  at  least  transparent. 
I  have  been  greatly  amused  while  perusing  some  of  their  Sophis- 
tries in  the  light  of  subsequent  experience.  For  example,  two  of 
their  favorite  and  overworked  syllogisms  might  be  thus  para- 
phrased: (1)  In  economics,  whatever  is  is  the  result  of  evolution; 
whatever  is  the  result  of  evolution  is  "here  to  stay;"  therefore  the 
new  system  of  trust  monopoly  is  permanent  and  unassailable.  ('2) 
All  are  free  to  compete.  Where  there  is  freedom  to  compete  there 
can  be  no  monopoly.  There  being  no  monopoly  there  is  no  case 
against  the  trust,  and  popular  protest  is  the  result  of  ignorance 
and  hostility  to  all  corporations  and  all  capital. 

"All  these  fallacies  and  sophisms  were  soon  exposed,  how- 
ever, and  the  people  came  to  see  with  clear  vision  the  problem 
that- confronted  them.  But  the  events  which  did  more  than  all 
else  to  unite  the  people  in  unyielding  opposition  to  the  trust 
system  were  these: 

"1.  The  various  trusts,  finding  as  usual  that  in  union  there 
is  strength,  formed  a  close  Inter-Trust  Alliance,  or,  as  some 
called  it,  a  'Trust  of  Trusts,'  under  which,  besides  a  covenant 
that  one  trust  should  not  compete  with  another,  their  combined 
resources,  espionage  and  political  and  financial  influence  were  used 
to  prevent  or  defeat  adverse  political  action,  or  on  occasion  were 
all  placed  at  the  service  of  any  one  trust  which  was  threatened 
either  by  attempted  competition  or  a  hostile  decision  of  the 
courts.  To  these  ends  the  alliance  kept  always  on  hand  a  gen 
erous  'fighting  fund'  and  its  mailed  fist  was  often  felt. 

"2.  The  organization  of  the  Inter-Trust  Alliance  was  soon 
followed  with  that  of  an  International  Trust  League,  whereby 
all  the  trusts  in  the  United  States  entered  into  alliance  with  all 
similar  organizations  in  other  countries— for  meantime  the  Ameri- 


AN  INTER-TRUST  ALLIANCE.  271 

can  trust  contagion  had  spread  to  Europe— the  objects  being  sub- 
stantially the  same  as  those  of  the  Inter-Trust  League,  only 
made  operative  on  the  stage  of  the  world.  It  had  the  additional 
purpose  of  preventing  the  competition  of  foreign  trusts  from 
interfering  with  the  monopoly  enjoyed  by  the  domestic  trusts 
In  each  country. 

"3.  After  these  two  measures  had  been  perfected  it  trans- 
pired that  the  agents  of  the  American  Inter-Trust  Alliance  wore 
busily  at  work  endeavoring-  to  unite  all  skilled  workmen  in 
trust  employ  in  a  movement  adroitly  named  the  Workmen's 
and  Employers'  Co-operative  Guild.  The  plan  involved  an  alli- 
ance between  all  workmen  and  their  trust  employers  along 
these  lines,  reinforced  by  boards  of  arbitration  and  conciliation, 
etc.:  Workmen  should  in  any  case  receive  a  minimum  living 
wage.  Their  wages  should  be  increased  a  certain  per  cent,  as 
often  as  price  of  product  was  advanced  above  the  cost  level, 
and  reduced  correspondingly  when  prices  were  reduced,  but 
wages  should  never  go  below  the  agreed  minimum.  All  the 
workmen  were  to  be  organized  in  unions;  were  to  bind  them- 
selves not  to  work  for  any  but  a  trust  employer,  and  to  use 
all  'legal'  means  to  prevent  other  workmen  from  serving  any 
employer  who  attempted  to  withdraw  from  or  compete  with 
a  trust.  On  the  other  hand,  by  adroit  manipulation  of  rules,  the 
membership  of  the  labor  unions  was  to  be  practically  and  sharply 
limited  and  the  employing  trusts  were  to  bind  themsel/es  never 
to  employ  non-union  workmen. 

"This  attempt  to  bring  about  an  offensive  and  defensive 
'combine'  between  the  allied  monopoly-trust  and  organized  la- 
bor, had  the  evident  triple  purpose  of  finally  destroying  even 
'potential'  competition  against  the  trusts,  securing  to  them  the 
good-will  and  political  backing  of  the  labor  vote,  and  perma- 
nently placing  the  general  public  at  the  absolute  mercy  of 
monopoly  prices  and  methods.  Some  labor  leaders  and  a  large 
section  of  the  workmen  favored  the  project  and  pointed  to 
the  results  in  the  so-called  Smithsonian  or  Birmingham  move- 
ment, which  had  nearly  doubled  workmen's  wages  in  seven 
years.  What  would  have  been  the  outcome  but  for  interrupt- 
ing events,  can  only  be  conjectured. 

"4.  The  next  historic  episode  of  the  great  debate  was  this: 
At  first,  through  anonymous  contributions  to  the  newspapers, 
then  by  special  pamphlets,  and  well-written  magazine  articles, 
and  finally  by  public  conventions,  there  sprang  up  a  serious  and 
able  discussion  of  the  proposition  that  the  natural  and  practical, 
if  not  the  only,  escape  from  the  tyranny  of  private  monopoly 
as  embodied  in  the  trust  system  was  through  the  gateway  of 
state  socialism.  Most  of  these  writers  and  speakers  were  pes- 


272  TRUSTS  OR  COMPETITION? 

simistic  as  to  the  possibility  of  any  return  to  the  competitive 
plan.  Some  believed  such  a  return  would  be  unwise,  even  if 
feasible.  It  was  suggested  that  nearly  all  old-time  arguments 
against  state  socialism  had  been  swept  away  by  the  trust 
deluge;  that  instead  of  having  to  consult  tens  of  thousands  of 
small  proprietors,  it  would  only  be  necessary  to  deal  with  per- 
haps threescore  trust  magnates;  that  instead  of  state  socialism 
destroying  the  great  middle  class  of  independent  manufacturers 
and  dealers,  the  private  monopoly  system  was  already  rapidly 
eliminating  that  class;  that  the  same  trained  talent  which  was 
then  efficiently  managing  the  trust  industries  would  willingly 
accept  the  nation  as  their  employer  instead  of  the  trust,  on 
conditions  easily  arranged.  The  United  States  postal  service, 
the  largest  and  best-managed  business  establishment  in  the 
world,  was  the  standing  and  star  argument  of  the  state  social- 
ists, the  object  lesson  which  was  held  to  prove  that,  with  a 
properly  organized  civil  service,  the  nation  could  carry  on  with 
economy,  efficiency  and  success  any  business,  whatever  its  com- 
plexity or  magnitude. 

"The  veteran  socialists  of  all  schools  and  all  shades  of 
opinion  in  Europe  and  America  were  delighted  with  the  out- 
look, and  actually  spoke  of  the  United  States  as  the  soon -to-be 
Socialist  Republic — the  Paradise  of  the  Experimenters,  the  Ca- 
naan of  the  Disinherited.  The  disciples  of  Bellamy  proved  to 
be  far  more  numerous  than  had  been  suspected  and  they  did 
not  fail  to  make  themselves  heard.  In  several  leading  cities  elec- 
tions were  carried  by  a  fusion  of  socialists,  unemployed  working- 
men  and  the  general  army  of  the  discontented.  Then  followed 
bedlam  in  municipal  affairs,  prostration  of  public  credit,  demoraliz- 
ation and  incredible  corruption  everywhere,  crude  and  ruinous 
ventures  in  municipal  management  of  "public  utilities,"  and  a 
reign  of  that  peculiar  tyranny  and  intolerable  insolence  which 
always  mark  the  promotion  of  the  self-appointed  leaders  of  a  cer- 
tain class  to  sudden  and  unaccustomed  place  and  power. 

"The  one  argument  which  had  weight  with  the  mass  of  the 
people  was  this:  'If  we  are  bound  to  live  under  a  system  of 
monopoly,  let  that  monopoly  be  public  and  not  private,  respon- 
sible and  not  irresponsible,  our  own  and  not  the  perquisite  of 
a  privileged  class;  let  its  profits  or  benefits  accrue  to  the  people 
and  not  to  the  plutocrats,  to  the  many  and  not  to  the  few.' 
Almost  these  exact  words  formed  part  of  the  platform  adopted 
in  1904  at  the  national  convention  of  a  numerous  political  party 
newly  organized  on  this  issue.  The  largest  workinginen's  or- 
ganization in  the  world,  the  American  Federation  of  Labor,  at 
its  convention  in  December,  1899,  resolved  that  the  trust  move- 
ment was  irresistible,  that  it  would  advance  until  practically 


LOOK  TO  THE  COURTS  273 

all  industries  were  controlled  by  one  organization,  and  then  the 
people  would  step  in  and  assume  possession  and  ownership. 

"Meantime  the  exponents  of  the  best  citizenship  Indignantly 
pointed  to  this  socialist  tendency  as  the  natural  outworking  of 
the  monopoly-trust  invasion.  They  charged  that  the  trust  was 
driving  the  people  to  socialism  by  the  short  cut  They  shud- 
dered at  the  thought  of  such  an  alternative,  but  warned  the 
leaders  of  all  parties  that  if  the  people  were  finally  forced  to 
choose  between  the  known  evils  of  industrial  monopoly  in  private 
hands  and  the  unknown  evils  and  benefits  of  a  government 
monopoly,  they  would  surely  prefer  the  latter.  And  so,  while 
remedies  were  delayed,  the  foundations  of  the  social  order  were 
under  discussion  and  the  Great  Republic  stood  face  to  face  with 
a  Great  Temptation.  During  the  period  of  which  I  speak  occurred 
one  incident  which  will  interest  you,  for  the  double  reason  that  it 
has  some  local  color  and  also  serves  to  illustrate  the  state  of  public 
feeling  at  the  time.  This  university  was  then  organizing  and  the 
trustees  received  an  offer  from  a  group  of  three  monopoly  mag- 
nates to  furnish  the  entire  desired  endowment  of  fifty  million 
dollars.  By  a  unanimous  vote  the  offer  was  courteously  declined. 

"We  now  come  to  the  final  and  pleasanter  aspect  of  this 
singularly  interesting  epoch— to  the  record  of  those  orderly 
events  which  happily  resulted  in  solving  the  great  problem,  in 
abolishing  the  monopoly-trusts,  in  doing  away  with  industrial 
bondage,  and  in  substituting  a  system  of  effective  but  self- 
regulating  competition,  which,  as  you  see  around  you,  preserves 
the  right  of  such  honest  capitalization  and  such  centralization 
of  production  as  enable  manufacturers  to  reach  the  maximum 
of  economic  efficiency,  and  thus  to  compete  in  the  world's  mar- 
kets, but  prevents  every  element  of  monopoly.  All  this  was  done 
without  a  resort  to  violence,  socialism,  or  confiscation.  You  will 
be  struck,  I  think,  with  the  leading  and  most  patriotic  role 
played  in  this  beneficial  restoration  by  that  splendid  body  of 
jurists  who  occupied  the  bench  at  the  opening  of  the  present 
century,  both  in  state  and  nation.  The  clearness  of  vision  and 
the  patriotic  courage  with  which  they  stripped  from  the  trust 
all  its  disguises  and  brushed  aside  the  cobwebs  of  legal  sophistry 
behind  which  the  managers  and  attorneys  of  the  trusts  believed 
themselves  permanently  secured,  were  invaluable  to  the  people 
and  simply  changed  the  current  of  history.  To  them  more  than 
to  all  others  combined  is  due  the  credit  for  the  republic's 
Great  Escape.  The  first  real  advance  took  the  form  of— 

(Here  the  university  bell  rang.) 

"—Gentlemen,  to  my  surprise  the  hour  is  up.  We  will  defer 
the  final  chapter  in  the  history  of  the  rise  and  decline  of  the 
monopoly-trust  system  to  another  day." 

18 


CHAPTER  X. 
ANTI-TRUST  LEGISLATION. 

Synopses  of  the  Statutes  Against  Trusts  and  Monopolies  Enacted  by 
Congress,  Twenty-nine  State  Legislatures  and  the  Canadian  Parlia- 
ment—Various Definitions  of  a  Trust— Penalties  Prescribed. 


[By  "domestic  corporation"  is  meant  a  corporation  organized  under 
the  laws  of  the  particular  state  whose  statute  is  under  consideration. 

By  "foreign  corporation"  is  meant  a  corporation  organized  under 
the  laws  of  some  other  state  or  country. 

By  "civil  damage  clause"  is  meant  that  the  law  in  the  synopsis  of 
which  this  expression  occurs  contains  a  provision  to  the  effect  that  any 
person  or  corporation  injured  by  any  of  the  acts  prohibited  in  the  law 
may  recover  damages  In  a  civil  suit  against  the  offending  party.]. 

THE    FEDERAL   ANTI-TRUST    STATUTE. 

Enacted  by  Congress  and  approved  by  President  Harrison,  July 
2,  1890.  Title. — "An  Act  to  protect  trade  and  commerce  against 
unlawful  restraints  and  monopolies."  The  question  of  its  applica- 
tion to  railroad  combinations  was  argued  before  the  United  States 
Supreme  Court  in  December,  1893,  on  appeal  from  the  Circuit  Court 
of  Appeals  for  the  Eighth  Circuit,  and  in  March,  1897,  a  comprehen- 
sive decision  was  rendered  (Mr.  Justice  Peckham),  fully  sustaining 
its  constitutionality.  As  the  authority  of  the  United  States  to 
legislate  in  matters  of  this  nature  is  derived  wholly  from  those 
clauses  of  the  Constitution  which  give  to  the  Federal  Government 
exclusive  power  to  regulate  foreign  and  interstate  commerce,  and 
power  to  make  laws  governing  the  territories  and  the  District  of 
Columbia,  the  scope  of  this  statute  is  necessarily  limited  accordingly. 
In  the  following  summary  all  material  parts  of  the  law  are  given 
verbatim: 

Provisions. — "Section  1.  Every  contract  combination  in  the  form 
of  trust  or  otherwise,  or  conspiracy  in  restraint  of  trade  or  com- 
merce among  the  several  states  or  with  foreign  nations  is  hereby 
declared  to  be  illegal.  Every  person  who  shall  make  any  such  con- 
tract or  engage  in  any  such  combination  or  conspiracy  shall  be  deemed 
guilty  of  a  misdemeanor,  and  on  conviction  thereof  shall  be  punished 
by  a  fine  not  exceeding  $5,000,  or  by  imprisonment  not  exceeding  one 

274 


FEDERAL  ANTI-TRUST  LAW.  275 

year,  or  by  both  said  punishments,  in  the  decretion  of  the  court.  Sec. 
2.  Every  person  who  shall  monopolize  or  attempt  to  monopolize, 
or  combine  or  conspire  with  any  other  person  or  persons  to  monopo- 
lize, any  part  of  the  trade  or  commerce  among  the  several  states  or 
with  foreign  nations,  shall  be  deemed  guilty  of  a  misdemeanor,  and, 
on  conviction  thereof,  shall  be  punished  by  "fine  not  exceeding  $5,000, 
or  by  imprisonment  not  exceeding  one  year,  or  by  both  said  punish- 
ments, in  the  discretion  of  the  court."  Sec.  3  declares  illegal  every 
contract,  combination  in  form  of  trust  or  otherwise,  or  conspiracy,  in 
restraint  of  trade  or  commerce  in  any  territory  of  the  United  States 
or  the  District  of  Columbia,  or  between  any  territory  and  another, 
or  between  any  territory  and  any  state  or  the  District  of  Columbia, 
or  with  foreign  nations,  and  declares  guilty  of  a  misdemeanor  any 
person  who  shall  enter  into  any  such  contract  or  combination;  the 
penalty  being  a  fine  not  exceeding  $5,000,  or  imprisonment  not  ex- 
ceeding one  year,  or  both.  Sec.  4  invests  the  Circuit  Courts  of  the 
United  States  with  jurisdiction  to  prevent  and  restrain  violations 
of  this  act,  and  makes  it  the  duty  of  United  States  District  At- 
torneys, under  the  direction  of  the  Attorney-General,  to  institute  pro- 
ceedings in  equity  to  prevent  and  restrain  such  violations,  by  petition 
and  injunction  or  otherwise.  Sec.  5  authorizes  the  summoning  of 
other  parties,  residing  within  or  without  the  district  where  proceed- 
ings are  brought.  Sec.  6  provides  that  any  property  owned  under 
any  such  illegal  contract  and  being  the  subject  thereof,  and  being  in 
the  course  of  transportation  from  one  state  to  another  or  to  a 
foreign  country,  shall  be  forfeited  to  the  United  States.  Sec.  7  pro- 
vides that  any  person  who  shall  be  injured  in  his  business  or  property 
by  any  other  person  or  corporation  by  reason  of  anything  forbidden 
in  this  act  may  sue  therefor  in  any  Circuit  Court  of  the  United  States 
without  respect  to  amount  in  controversy,  and  shall  recover  three- 
fold the  damages  sustained,  cost  of  suit  and  reasonable  attorney's 
fee.  Sec.  8  defines  "person"  as  herein  used  to  include  corporations 
and  associations  existing  under  or  authorized  by  the  laws  of  either  of 
the  United  States,  of  any  territory  or  of  any  foreign  country. 

Alabama. — This  state  has  limited  its  anti-trust  legislation  to  a 
law  prohibiting  combinations  of  insurance  companies  from  fixing 
and  maintaining  rates*,  approved  February  18,  1897.  Title.— "An 
Act  to  more  effectively  protect  the  people  against  combinations,  con- 
spiracies and  agreements  between  insurers,  whereby  rates  of  insur- 
ance are  raised  or  fixed."  Provisions. — The  preamble  reads: 
"Whereas  existing  laws  have  proved  inadequate  to  protect  the  people 
against  combinations,  conspiracies  and  agreements  between  insur- 
ers, whereby  rates  of  insurance  are  raised  or  fixed  by  such  practices, 
therefore,  in  order  to  suppress  such  combinations,  conspiracies  and 
agreements  to  the  end  that  competition  in  business  shall  alone  make 
such  rates."  In  event  of  loss  or  damage  under  any  policy  issued 
after  the  passage  of  this  Act  the  insured  or  assigns  shall  recover  25 
per  cent,  over  and  above  actual  loss  or  damage,  if  at  date  of  issuing 
the  policy  or  thereafter,  but  before  time  of  trial  of  cape,  the  in- 
surer was  in  any  way  connected  with  any  "tariff  association  or  such 
like  thing  by  whatever  name  called,"  or  had  any  understanding  with 
any  other  person,  corporation  or  association  within  or  without  this 


276  TRUSTS  OR  COMPETITION? 

state  respecting  rates;  and  no  stipulation  in  such  policy  or  con- 
tract to  arbitrate  loss  or  damage  or  as  to  notice  or  proof  of  loss  shall 
be  binding  on  the  insured.  This  statute  shall  be  liberally  con- 
strued to  accomplish  its  object. 

Arkansas. — Approved  March  16,  1897.  Title. — "An  Act  to  pre- 
vent combinations  of  trusts  and  corporations  in  the  State  of  Arkan- 
sas." Provisions. — "Section  1.  That  from  and  after  the  passage  of 
this  Act  all  arrangements,  contracts,  agreements,  trusts  or  combina- 
tions between  persons  or  corporations,  made  with  view  to  lessen,  or 
which  tend  to  lessen,  full  and  free  competition  in  the  importation 
or  sale  of  articles  of  domestic  growth  or  of  domestic  raw  material,  and 
all  arrangements,  contracts,  agreements,  trusts  or  combinations  be- 
tween persons  or  corporations  designed  or  which  tend  to  advance,  re- 
duce or  control  the  price,  or  the  cost  to  the  producer  or  to  the  con- 
sumer of  any  such  article  or  product,  are  hereby  declared  to  be 
against  public  policy,  unlawful  and  void."  Every  domestic  corpora- 
tion which  violates  this  act  forfeits  its  charter,  franchises  and  cor- 
porate existence.  Every  offending  foreign  corporation  is  prohibited 
doing  business  in  the  state.  Violation"  of  the  Act  is  declared  "de- 
structive of  full  and  free  competition,  and  a  conspiracy  against  trade," 
and  persons  who  as  principals,  managers,  directors  or  agents,  or  in 
any  other  capacity,  knowingly  carry  out  any  unlawful  provisions 
of  any  such  conspiracy  shall  be  punished  by  fine  from  $500  to  §2,000, 
or  by  penitentiary  imprisonment  from  one  to  ten  years.  The  Act 
does  not  apply  to  agricultural  products  nor  live  stock  while  in  posses- 
sion of  the  producer.  Any  person  injured  or  damaged  by  any  such 
trust  or  combination  may  sue  for  and  recover  amount  paid  for  any 
goods  purchased  therefrom. 

California. — Anti-trust  legislation  here  is  limited  to  "An  Act  to 
prevent  combinations  to  obstruct  the  sale  of  live  stock  in  the  state 
of  California,"  approved  February  27,  1893.  The  law  is  of  strictly 
local  bearing  and  of  little  consequence. 

Georgia. — Act  approved  December  23,  1896.  Title. — "An  Act 
to  declare  unlawful  and  void  all  arrangements,  contracts,  agreements, 
trusts  or  combinations  made  with  a  view  to  lessen,  or  which  tend  to 
lessen,  free  competition  in  the  importation  or  sale  of  articles  imported 
into  this  state,  or  in  the  manufacture  or  sale  of  articles  of  domestic 
growth,  or  of  domestic  raw  material;  to  declare  unlawful  and  void 
all  arrangements,  contracts,  agreements,  trusts  or  combinations  be- 
tween persons  or  corporations  designed,  or  which  tend  to  advance,  re- 
duce or  control  the  price  of  such  product  or  article  to  producer  or 
consumer  of  any  product  or  article;  to  provide  for  forfeiture  of  the 
charter  and  franchise  of  any  corporation  organized  under  the  laws  of 
this  state  violating  any  of  the  provisions  of  this  Act;  to  prohibit  every 
foreign  corporation  violating  any  of  the  provisions  of  this  Act  from 
doing  business  in  this  state;  to  require  the  Attorney-General  of 
this  state  to  institute  legal  proceedings  against  any  such  corporation 
violating  any  of  the  provisions  of  this  Act,  and  to  enforce  the  penal- 
ties prescribed;  to  prescribe  penalties  for  any  violation  of  this  Act; 
to  authorize  any  person  or  corporation  damaged  by  any  such  trust, 
agreement  or  combination  to  sue  for  the  recovery  of  such  damage, 
and  for  other  purposes." 


THE  ILLINOIS  STATUTE.  277 

Provisions.— Section  1  repeats  almost  verbatim  the  language  of 
the  foregoing  title  and  declares  all  acts  of  the  nature  therein  described 
to  be  "against  public  policy,  unlawful  and  void."  Sec.  2  forfeits  the 
charter,  franchises  and  corporate  existence  of  any  domestic  corpora- 
tion, and  excludes  from  doing  business  in  the  state  any  foreign 
corporation  violating  the  provisions  of  the  act;  the  Attorney-General 
being  required  to  enforce  these  penalties.  Violation  of  the  Act  is 
further  declared  to  be  "destructive  of  full  and  free  competition,  and 
a  conspiracy  against  trade,  and  persons  who  engage  in  any  such 
conspiracy,  or  who  shall  in  any  capacity  whatever  knowingly  carry 
out  any  of  the  purposes  herein  prohibited,  shall  on  conviction  be 
fined  from  $100  to  $5,000,  and  imprisoned  in  the  penitentiary  from 
one  to  ten  years.  The  Act  does  not  apply  to  agricultural  products 
or  live  stock  while  in  the  possession  of  the  producer  or  raiser.  Any 
person  or  corporation  injured  by  any  of  the  prohibited  acts  may  sue 
and  recover  the  full  consideration  paid  for  any  articles  controlled  by 
any  such  trust.  Judges  of  the  Superior  Court  of  the  state  are 
required  to  specially  instruct  grand  jurors  as  to  the  provisions  of 
this  Aot. 

Illinois.— Original  statute  approved  June  11,  1891;  in  amended 
form  approved  June  10,  1897.  Title — "An  Act  to  provide  for  the 
punishment  of  persons,  copartnerships  or  corporations  forming  pools, 
trusts  and  combines,  and  mode  of  procedure  and  rules  of  evidence  in 
such  cases."  Provisions. — 'Section  1  reads:  "If  any  corporation  or- 
ganized under  the  laws  of  this  or  any  other  state  or  country  for 
transacting  or  conducting  any  kind  of  business  in  this  state,  or  any 
partnership  or  individual  or  other  association  of  persons  whosoever 
shall  create,  enter  into,  become  a  member  of,  or  a  party  to,  any  pool, 
trust,  agreement,  combination,  confederation  or  understanding  with 
any  other  corporations,  partnership,  individual  or  any  other  person 
or  association  of  persons,  to  regulate  or  fix  the  price  of  any  article 
of  merchandise  or  commodity,  or  shall  enter  into,  become  a  member 
of,  or  party  to,  any  pool,  agreement,  contract,  combination  or  con- 
federation to  fix  or  limit  the  amount  or  quantity  of  any  such  article, 
commodity  or  merchandise  to  be  manufactured,  mined,  produced  or 
sold  in  this  state,  such  corporation,  partnership  or  individual  or  other 
association  of  persons  shall  be  deemed  and  adjudged  guilty  of  a 
conspiracy  to  defraud,  and  be  subject  to  indictment  and  punishment 
as  provided  in  this  act:  Provided,  however,  that  in  the  mining, 
manufacture  or  production  of  articles  of  merchandise,  the  cost  of 
which  is  mainly  made  up  of  wages,  it  shall  not  be  unlawful  for 
persons,  firms  or  corporations  doing  business  in  this  state  to  enter 
into  a  joint  arrangement  of  any  sort,  the  principal  object  or  effect 
of  which  is  to  maintain  or  increase  wages."  Sec.  2  prohibits  domes- 
tic corporations  from  issuing  or  owning  trust  certificates  and  pro- 
hibits corporations,  their  agents,  officers  and  employes,  directors  and 
stockholders,  from  entering  into  any  combination  or  agreement  with 
persons  or  corporations,  or  director,  or  stockholder  of  the  latter,  to 
place  the  management  or  control  of  such  combination  or  its  manu- 
factured products  in  the  hands  of  any  trustee  with  the  intent  to 
limit  or  fix  the  price  or  lessen  the  price  or  sale  of  any  article  of 
commerce,  use  or  consumption,  or  to  prevent,  restrict  or  diminish  the 


278  TRUSTS  OR  COMPETITIONf 

manufacture  or  output  of  any  such  article.  Sec.  3  prescribes  the 
penalties  for  violation  of  the  Act:  Either  party  may  demand  a  trial 
by  jury,  and  an  offending  corporation,  company,  firm  or  association 
shall,  on  conviction,  be  fined  from  $500  to  $2,000  for  the  first  offense; 
from  $2,000  to  $5,000  for  the  second;  from  $5,000  to  $10,000  for  the 
third  offense,  and  $15,000  for  each  subsequent  offense.  Any  officer, 
receiver  or  other  representative  of  any  corporation,  company,  firm  or 
association,  or  any  individual  found  guilty  of  violating  the  first  sec- 
tion of  this  Act  is  punishable  by  a  fine  of  $200  to  $1,000,  or  by 
jail  imprisonment  not  exceeding  one  year,  or  both.  All  contracts 
made  in  violation  of  the  Act  are  declared  void.  Any  purchaser  of 
any  commodity  from  any  individual  or  corporation  doing  business  con- 
trary to  any  preceding  provision  of  this  Act  shall  not  be  liable  for 
payment  therefor.  The  fines  herein  prescribed  are  recoverable  in  an 
action  for  debt  in  the  name  of  the  people  of  Illinois.  In  all  cases 
a  preponderance  of  evidence  in  favor  of  the  people  shall  be  sufficient 
to  authorize  a  verdict  and  judgment  for  the  people.  Prosecuting 
attorneys  in  their  respective  jurisdictions  and  the  Attorney-General 
are  required  to  enforce  this  act.  In  case  of  conviction,  the  informer  is 
entitled  to  one-fifth  of  the  fine  recovered  and  collected.  All  fines  are 
required  to  be  paid  into  the  treasuries  of  the  respective  counties  where 
the  suits  are  brought,  to  be  used  for  county  purposes. 

Indiana.— Approved  March  5,  1897,  and  almost  a  verbatim  copy 
of  the  Georgia  anti-trust  statute.  Title. — "An  Act  to  declare  unlaw- 
ful and  void  all  arrangements,  contracts,  agreements,  trusts  or  com- 
binations made  with  a  view  to  lessen,  or  which  tend  to  lessen,  free 
competition  in  the  importation  or  sale  of  articles  imported  into  this 
state,  or  in  the  manufacture  or  sale  of  articles  of  domestic  growth  or 
of  domestic  raw  material;  to  declare  unlawful  and  void  all  arrange- 
ments, contracts,  agreements,  trusts  or  combinations  between  persons 
or  corporations  designed,  or  which  tend  to  advance,  reduce  or  control 
the  price  of  such  product  or  article  to  producer  or  consumer  of  any 
product  or  article;  to  provide  for  forfeiture  of  the  charter  and  fran- 
chise of  any  corporation  organized  under  the  laws  of  this  state 
violating  any  of  the  provisions  of  this  Act;  to  prohibit  every  foreign 
corporation  violating  any  of  ttie  provisions  of  this  Act  from  doing 
business  in  this  state;  to  require  the  Attorney-General  of  this  state 
to  institute  legal  proceedings  against  any  such  corporation  violating 
any  of  the  provisions  of  this  Act,  and  to  enforce  the  penalties  pre- 
scribed; to  prescribe  penalties  for  any  violation  of  this  Act;  to 
authorize  any  person  or  corporation  damaged  by  any  such  trusc, 
agreement  or  combination  to  sue  for  the  recovery  of  such  damage, 
and  for  other  purposes." 

Provisions. — Section  1  reads  as  follows:  "Be  it  enacted  by  the 
General  Assembly,  etc.,  that  from  and  after  the  passage  of  this  act 
all  arrangements,  contracts,  agreements,  trusts  or  combinations 
between  persons  or  corporations,  who  control  the  output  of  any  artisle 
of  merchandise,  made  with  a  view  to  lessen,  or  which  tend  to  lessen, 
full  and  free  competition  in  the  importation  or  sale  of  articles  imported 
into  this  state,  and  all  arrangements,  contracts,  agreements,  trusts  or 
combinations,  between  persons  or  corporations,  who  control  the  out- 
put of  any  article  of  merchandise  designed,  or  which  tend  to  advance, 


IOWA  AND  KANSAS.  279 

reduce  or  control  the  price  or  the  cost  to  the  producer  or  to  the 
consumer  of  any  such  product  or  article,  are  hereby  declared  to  be 
against  public  policy,  unlawful  and  void."  Sec.  2  forfeits  the  char- 
ter, franchises  and  corporate  existence  of  any  domestic  corporation, 
and  excludes  from  doing  business  in  the  state  any  foreign  corpora- 
tion violating  the  provisions  of  the  act;  the  Attorney-General  being 
required  to  enforce  these  penalties.  Violation  of  the  Act  is  further 
declared  to  be  "destructive  of  full  and  free  competition  and  a  con- 
spiracy against  trade,  and  persons  who  engage  in  any  such  conspiracy, 
or  who  shall  in  any  capacity  whatever  knowingly  carry  out  any  of 
the  purposes  herein  prohibited,  shall  on  conviction  be  fined  from  $100 
to  $5,000.  and  imprisoned  in  the  penitentiary  from  one  to  ten  years. 
The  Act  does  not  apply  to  agricultural  products  or  live  stock  while  in 
the  possession  of  the  producer  or  raiser.  Civil  damage  clause. 

Iowa.— Approved  May  6,  1890.  Title.— "An  Act  for  the  punish- 
ment of  pools,  trusts,  combinations  and  conspiracies  and  as  to  evidence 
in  such  cases."  Provisions. — Section  1  reads:  "If  any  corporation  or. 
ganized  under  the  laws  of  this  or  any  other  state  or  country,  for 
transacting  any  kind  of  business  in  this  state,  or  any  partnership  or 
individual  or  other  association  of  persons  whosoever,  shall  create, 
enter  into  or  become  a  member  of,  or  a  party  to,  any  trust,  agree- 
ment, combination,  confederation  or  understanding  with  any  other 
corporation,  partnership,  individual,  or  any  person  or  association  of 
persons,  to  regulate  or  fix  the  price  of  any  article  of  merchandise  or 
commodity,  or  shall  enter  into,  become  a  member  of,  or  party  to, 
any  pool,  agreement,  contract,  combination  or  confederation  to  fix  or 
limit  the  amount  or  quantity  of  any  article,  commodity  or  merchan- 
dise to  be  manufactured,  raised,  produced  or  sold  in  this  state, 
shall  be  deemed  and  adjudged  guilty  of  a  conspiracy  to  defraud,  and 
be  subject  to  indictment  as  provided  in  this  act."  Sec.  2  prohibits 
corporations  from  issuing  or  owning  trust  certificates,  and  makes  it 
unlawful  for  any  corporation  or  representative  or  stockholder  thereof 
to  combine  or  agree  with  any  person  or  corporation  to  enter  into  a 
combination  or  agreement  with  any  other  party  with  the  purpose  or 
effect  of  placing  management  or  control  of  such  combination  or  its 
manufactured  product  in  the  hands  of  trustees,  with  intent  to  limit  or 
fix  the  price  or  lessen  the  production  of  any  article  or  to  prevent  or 
restrict  the  output  of  any  such  article.  Any  corporation,  company, 
firm  or  association  violating  this  act  is  punishable  by  a  fine  of  from 
one  per  cent  to  twenty  per  cent  of  the  capital  stock  thereof  or  amount 
invested  in  such  company,  firm  or  association;  officers,  receivers  or 
other  authorized  representatives  thereof  who  violate  the  first  section 
of  this  Act  are  punishable  by  a  fine  from  $500  to  $5,000,  and  in 
addition  may  be  punished  by  jail  imprisonment  not  exceeding  one  year. 

Kansas. — Approved  March  8,  1897.  Title.— "An  Act  defining  and 
prohibiting  trusts,  providing  procedure  to  enforce  the  provision  of  this 
Act,  and  providing  penalties  for  violations  of  the  provisions  of  this 
Act."  Provisions. — "Section  1.  A  trust  is  a  combination  of  capital, 
skill  or  acts,  by  two  or  more  persons,  firms,  corporations  or  associa- 
tions of  persons,  or  either  two  of  them,  for  either,  any  or  all  of  the 
following  purposes:  First. — To  create  or  carry  out  restrictions  in  the 


280  TRUSTS  OR  COMPETITION? 

full  and  free  pursuit  of  any  business  authorized  or  permitted  by 
the  laws  of  this  state.  Second. — To  increase  or  reduce  the  price  of 
merchandise,  produce  or  commodities,  or  to  control  the  cost  or  rate  of 
insurance.  Third.— To  prevent  competition  in  the  manufacture,  mak- 
ing, transportation,  sale  or  purchase  of  merchandise,  produce  or  com- 
modities, or  to  prevent  competition  in  aids  to  commerce.  Fourth. — 
To  fix  any  standard  or  figure,  whereby  its  price  to  the  public  shall 
be  in  any  manner  controlled  or  established  (for)  any  article  or  com- 
modity of  merchandise,  produce  or  commerce  intended  for  sale,  use 
or  consumption  in  this  state.  Fifth. — To  make  or  enter  into,  or 
execute  or  carry  out,  any  contract,  obligation  or  agreement  of  any 
kind  or  description  by  which  they  shall  bind,  or  have  to  bind,  them- 
selves not  to  sell,  manufacture,  dispose  of  or  transport  any  article 
or  commodity,  or  article  of  trade,  use,  merchandise,  commerce  or 
consumption  below  a  common  standard  figure,  or  by  which  they  shall 
agree,  in  any  manner,  to  keep  the  price  of  such  article,  commodity  or 
transportation  at  a  fixed  or  graded  figure,  or  by  which  they  shall,  in 
any  manner,  establish  or  settle  the  price  of  any  article  or  commodity, 
or  transportation,  between  them  or  themselves  and  others,  to  preclude 
a  free  and  unrestricted  competition  among  themselves  or  others  in 
transportation,  sale  or  manufacture  of  any  such  article  or  com- 
modity, or  by  which  they  shall  agree  to  pool,  combine  or  unite  any 
interest  they  may  have  in  connection  with  the  manufacture,  sale  or 
transportation  of  any  such  article  or  commodity  that  its  price  may  in 
any  manner  be  affected.  And  any  such  combinations  are  hereby  de- 
clared to  be  against  public  policy,  unlawful  and  void. 

Kentucky. — Approved  May  20,  1890.  Title.— "An  Act  to  prevent 
the  establishment  of  pools,  trusts  and  conspiracies,  and  to  provide 
punishments  therefor."  Provisions. — Section  1  reads:  "That  if  any 
corporation  under  the  laws  of  Kentucky,  or  under  the  laws  of  any 
other  state  or  county  (country),  for  transacting  or  conducting  any  kind 
of  business  in  this  state,  or  any  partnership,  company,  firm  or  in- 
dividual, or  other  association  of  persons,  shall  create,  establish,  or- 
ganize or  enter  into  or  become  a  member  of  or  a  party  to,  or  in  any 
way  interested  in,  any  pool,  trust,  combine,  agreement,  confederation 
or  understanding  with  any  other  corporation,  partnership,  individual 
or  persons  or  association  of  persons,  for  the  purpose  of  regulating  or 
controlling  or  fixing  the  price  of  any  merchandise,  manufacture,  ar- 
ticles of  property  of  any  kind,  or  shall  enter  into,  become  a  member  of, 
or  party  to,  or  in  any  way  interested  in  any  pool,  agreement,  contract, 
understanding,  combination  or  confederation  having  for  its  object  the 
fixing  or  in  any  way  limiting  the  amount  or  quantity  of  any  article 
of  property,  commodity  or  merchandise  to  be  produced  or  manufac- 
tured, mined,  bought  or  sold,  shall  be  deemed  guilty  of  the  crime  of 
conspiracy  and  punished  therefor  as  provided  in  the  subsequent  sec- 
tions of  this  act."  Sec.  2  prohibits  any  corporation  from  issuing  cr 
owning,  haying  or  selling,  trust  certificates  or  stocks,  and  prohibits  any 
representative  of  any  corporation  from  entering  into  any  agreement 
or  understanding,  verbally  or  in  writing,  the  purpose  or  effect  of 
which  would  be  to  place  the  control  of  any  part  of  the  business  of 
such  concern  or  its  product  in  the  control  of  any  trustee  or  trustees, 
with  the  intent  to  limit,  fix,  establish  or  change  the  price  of  such 


LOUISIANA— MAINE.  281 

product.  Any  offending  corporation  is  subject  to  a  fine  of  from  $500 
to  $5,000,  and  any  officer  or  representative  of  any  such  offending  cor- 
Ijoration  or  combination  found  guilty  of  any  violation  of  this  act  is 
subject  to  a  fine  of  $500  to  $5,000,  or  jail  imprisonment  from  six 
to  twelve  months,  or  both  of  these  penalties.  All  contracts  in  con- 
travention of  this  act  are  void  and  not  c-nforcible  at  law.  Purchasers 
of  property  or  articles  from  any  person,  firm,  company  or  corporation 
transacting  business  contrary  to  the  provisions  of  this  act  shall  not 
be  liable  for  the  payment  of  the  price  for  the  same.  Offending  cor- 
porations forfeit  their  charter,  franchise  and  corporate  existence. 

Louisiana.— Approved  July  7,  1892.  Title.— "An  Act  to  prevent 
trusts  or  combinations  intended  to  restrain  trade  or  to  control  the 
market  value  of  merchandise,  produce  or  commodities,  and  to  pro- 
vide penalties  and  punishment  of  persons,  corporations,  firms  and 
associations  of  persons  connected  with  them,  and  to  promote  free 
competition  in  the  state  of  Louisiana."  Section  1  reads:  "That  after 
the  passage  of  this  act  it  shall  be  unlawful  for  any  individual,  firm, 
company,  corporation  or  association  to  enter  into,  continue  or  main- 
tain any  combination,  agreement  or  arrangement  of  any  kind,  ex- 
pressed or  implied,  with  any  other  individual,  firm,  company,  associa- 
tion or  corporation  for  any  of  the  following  purposes:  First. — To 
create  or  carry  out  restrictions  in  trade.  Second.— To  limit  or  reduce 
the  production  or  increase,  or  reduce  the  price  of,  merchandise,  produce 
or  commodities.  Third. — To  prevent  competition  in  the  manufacture 
making,  transportation,  sale  or  purchase  of  merchandise,  produce  or 
commodities.  Fourth. — To  fix  any  standard  or  figure  whereby  its 
price  shall  be  in  any  manner  controlled  or  established  of  any  article 
of  merchandise,  produce,  commodity  or  commerce  intended  for  com- 
merce in  this  state.  Fifth. — To  make  or  enter  into  or  execute  or 
carry  out  any  contract,  obligation  or  agreement  of  any  kind  or  de- 
scription by  which  they  shall  bind,  or  have  bound  themselves,  not 
to  sell,  dispose  of  or  transport  any  article  or  commodity  or  article  of 
trade,  use,  merchandise,  commerce  or  consumption,  below  a  common 
standard,  figure  or  by  which  they  shall  agree  in  any  manner  to  keep 
the  price  of  such  article  at  that  fixed  or  graduated  figure,  or  by  which 
they  shall  agree  in  any  manner  to  keep  the  price  of  such  article  at 
that  fixed  or  graduated  figure,  or  by  which  they  shall  in  any  manner, 
establish  or  settle  the  price  of  any  article  or  commodity  or  trans- 
portation between  them  or  themselves  and  others,  to  preclude  a  free 
and  unrestricted  competition  among  themselves  or  others  in  the  sale 
or  transportation  of  any  such  article  or  commodity,  or  by  which  they 
shall  agree  to  pool,  combine,  or  unite  any  interest  th'ey  may  have 
in  connection  with  the  sale  or  transportation  of  any  such  article  or 
commodity  that  its  price  might  in  any  manner  be  affected."  Any 
violation  of  any  of  the  provisions  of  this  act  is  declared  to  be  a  con- 
spiracy against  trade,  and  the  penalties  usually  provided  in  anti-trust 
statutes  against  offending  corporations,  combinations,  associations 
and  individuals  are  embodied  in  the  subsequent  sections  of  the 
statute. 

Maine.— Approved  March  7,  1889.  Title.— "An  Act  to  prevent 
euch  formation  of  trusts,  combination  of  business  firms,  incorporated 


282  TRUSTS  OR  COMPETITION? 

or  unincorporated  companies  or  associations  of  persons  or  stock- 
holders as  may  be  contrary  to  public  policy."  Section  1  of  the  act 
reads:  "It  shall  be  unlawful  for  any  firm  or  incorporated  company, 
or  any  number  of  firms  or  incorporated  companies,  or  any  unincorpora- 
ted company,  or  association  of  persons  or  stockholders  organized  for 
the  purpose  of  manufacturing,  producing,  refining  or  mining  any 
article  or  product  which  enters  into  general  use  and  consumption  by 
the  people,  to  form  or  organize  any  trust,  or  to  enter  into  any  com- 
bination of  firms,  incorporated  or  unincorporated  companies  or 
association  of  stockholders,  or  to  relegate  to  any  one  or  more  board 
of  boards  of  trustees  or  directors  the  power  to  conduct  and  direct 
the  business  of  the  whole  number  of  firms,  corporations,  companies 
or  associations  which  may  have,  or  which  may  propose  to  form,  a 
trust,  combination  or  association  inconsistent  with  the  provisions  of 
this  section,  contrary  to  public  policy." 

Subsequent  sections  prohibit  and  invalidate  all  certificates  of 
stock  or  other  evidence  of  interest  under  any  trust,  combination  or 
association  described  in  Section  1,  and  all  deeds  to  real  estate 
or  mortgage  thereon  given  by  any  person,  firm  or  corporation  for 
the  purpose  of  becoming  interested  in  such  trust,  combination  or 
association;  all  offending  corporations,  combinations  and  associations 
are  deemed  guilty  of  a  misdemeanor,  and  subject  to  a  fine  of  $5  to 
$10,000,  provided  that  every  corporation  or  association  interested 
in  any  trust  at  the  date  of  enacting  the  statute  shall  have  ninety 
days  within  w*hich  to  withdraw  from  the  same. 

Michigan.— Approved  July  1,  1889.  Title. — "An  Act  declaring 
certain  contracts,  agreements,  understandings  and  combinations  un- 
lawful, and  to  provide  punishments  for  those  who  shall  enter  into  the 
same,  or  do  any  act  in  performance  thereof."  Section  1  reads:  "That 
all  contracts,  agreements,  understandings  and  combinations  may  be 
entered  into  or  knowingly  assented  to  by  and  between  any  parties 
capable  of  making  a  contract  or  agreement  which  would  be  valid  at 
law  or  in  equity,  the  purpose  or  object  or  intent  of  which  shall  be  to 
limit,  control  or  in  any  manner  to  restrict  or  regulate  the  amount 
of  production  or  the  quantity  of  any  article  or  commodity  to  be 
raised  or  produced  by  mining,  manufacture,  agriculture  or  any  other 
branch  of  business  or  labor,  or  to  increase,  control  or  regulate  the 
market  price  thereof,  or  in  any  manner  to  prevent  or  restrict  free 
competition  in  the  production  or  sale  of  any  article  or  commodity, 
shall  be  utterly  illegal  and  void,  and  every  such  contract,  agreement, 
understanding  and  combination  shall  constitute  a  criminal  conspiracy, 
and  every  person  who  for  himself  personally,  or  as  a  member  or  under 
the  name  of  a  partnership,  or  as  a  member,  agent  or  officer  of  a 
corporation,  or  of  any  association  for  business  purposes  of  any  kind, 
who  shall  enter  into  or  knowingly  consent  to  any  such  void  and  illegal 
contract,  agreement,  understanding  or  combination,  shall  be  deemed 
a  party  to  such  conspiracy.  And  all  parties  so  offending  shall,  on 
conviction  thereof,  be  punished  by  a  fine  of  not  less  than  $50,  nor 
more  than  $300,  or  by  imprisonment  in  the  county  jail  not  more 
than  six  months,  or  by  both  such  fine  and  imprisonment,  at  the 
discretion  of  the  court,  and  the  prosecution  for  offense  under  this 
section  may  be  instituted  and  the  trial  had  in  any  county  where  any 


MINNESOTA-MISSISSIPPI.  283 

of  the  conspirators  became  parties  to  such  conspiracy,  or  in  which 
any  one  of  the  conspirators  shall  reside;  provided,  however,  that 
this  section  shall  in  no  manner  invalidate  or  affect  contracts  for 
what  is  known  and  recognized  at  common  law  and  in  equity  as  con- 
tracts for  the  'good  will  of  a  trade  or  business,'  but  all  such  contracts 
shall  be  left  to  stand  upon  the  same  terms  and  within  the  same 
limitations  recognized  at  common  law  and  in  equity."  Subsequent 
sections  provide  that:  "Every  contract,  understanding  or  combination 
declared  void  and  illegal  by  Section  1,  is  made  equally  void  and 
illegal  within  this  state,  whether  made  and  entered  into  within  or 
without  this  state.  The  carrying  into  effect  in  whole  or  in  part  of  any 
such  illegal  contract  or  understanding,  and  every  act  done  for  that 
purpose  by  any  of  the  parties  or  through  their  agents,  constitutes 
a  misdemeanor,  punishable  with  fine  and  imprisonment.  Offending 
domestic  corporations  forfeit  their  charter  and  all  rights  thereunder. 
The  provisions  of  the  act  do  not  apply  to  agricultural  products  or  live 
stock  while  in  the  hands  of  the  producer  or  raiser,  nor  to  the  services 
of  laborers  or  artisans  who  are  formed  into  societies  or  organizations 
for  the  benefit  and  protection  of  their  members. 

Minnesota.— Approved  April  20,  1891.  Title.— "An  Act  to  pro- 
hibit pools  and  trusts  in  the  state  of  Minnesota."  Provisions. — Section 
1  of  the  act  reads:  "If  any  corporation  organized  under  the  laws  of 
this  state,  or  any  other  state  or  country,  for  transacting  or  conducting 
any  kind  of  business  in  this  state,  or  any  partnership  or  individual 
shall  create,  enter  into,  become  a  member  of  or  a  party  to  any  pool, 
trust,  agreement,  combination  or  confederation  witfh  any  other  cor- 
poration, partnership  or  individual,  to  regulate  or  fix  the  price  of 
oil,  lumber,  coal,  grain,  flour,  provisions,  or  any  other  commodity  or 
article  whatever,  or  shall  create,  enter  into,  become  a  member  of  or  a 
party  to  any  pool,  agreement,  combination  or  confederation  to  fix  or 
limit  the  amount  or  quantity  of  any  commodity  or  article  to  be 
manufactured,  mined,  produced  or  sold  in  this  state,  shall  be 
deemed  guilty  of  a  conspiracy  to  defraud,  and  be  subject  to  in- 
dictment." Any  offending  person  or  corporation  is,  on  conviction, 
subject  to  a  fine  of  $100  to  $5,000.  Upon  the  trial  of  an  indictment 
against  a  corporation  or  copartnership  for  a  violation  of  Section  1 
of  this  act,  all  officers  and  agents  thereof  shall  be  competent  witnesses 
against  the  defendent,  and  may  be  compelled  to  testify  and  produce 
all  books  and  papers  in  their  control  pertinent  to  the  issue. 

Mississippi. — The  original  act  forms  part  of  the  "Enacted  Code  of 
the  General  Statute  Laws  of  the  State  of  Mississippi."  This  code  was 
adopted  in  1892,  and  was  amended  March  11,  1896  The  sections  of 
the  legislation  .referring  to  trusts  are  the  sections  in  the  code.  Sec- 
tion 4437  reads:  "A  trust  and  combine  is  a  combination,  contract, 
understanding  or  agreement,  expressed  or  implied,  between  two  or 
more  persons,  corporations  or  firms  or  associations  of  persons,  or  be- 
tween one  or  more  of  either  with  one  or  more  of  the  others:  (a)  In 
restraint  of  trade;  (b)  To  limit,  increase  or  reduce  the  price  of  a 
commodity;  (c)  To  limit,  increase  or  reduce  the  production  or  output 
of  a  commodity;  (d)  Intended  to  hinder  competition  in  the  produc- 
tion, importation,  manufacture,  transportation,  sale  or  purchase  of 


284  TRUSTS  OR  COMPETITION? 

a  commodity;  (e)  To  increase  or  forestall  a  commodity;  (f)  To 
issue,  own  or  hold  the  certificates  of  stock  of  any  trust  or  combine; 
(g)  To  place  the  control  to  any  extent  of  business,  or  of  the  products 
or  earnings  thereof,  in  the  power  of  trustees  by  whatever  name 
called;  (h)  By  which  any  other  organization  than  themselves,  their 
proper  officers,  agents  and  employees  shall  or  will  have  the  power  to 
conduct  or  control  the  management  of  business;  (i)  To  unite  to  pool 
interests  in  the  importation,  manufacture,  production,  transporta- 
tion or  price  of  a  commodity,  and  is  now  inimical  to  the  public  wel- 
fare, unlawful  and  a  criminal  conspiracy.  But  this  shall  not  apply 
to  the  associations  of  those  engaged  in  husbandry  in  their  dealings 
with  commodities  in  the  hands  of  the  producer,  nor  to  the  societies  of 
artisans  or  employees  or  laborers  formed  for  the  benefit  and  protection 
of  their  members."  Subsequent  sections  provide:  That  every  con- 
tract to  enter  into  or  pursue  any  trust  and  combine,  or  any  contract 
with  any  member  of  a  trust  or  combine,  is  void  and  non-enforcible. 
Every  offending  dpmestic  corporation  forfeits  its  charter  and  fran- 
chises, and  every  offending  foreign  corporation  forfeits  its  right  to 
do  business  in  the  state.  Persons  damaged  by  any  such  combination 
may  sue  and  recover.  Any  combination  to  prevent  free  competition 
and  bidding  for  the  performance  of  any  public  work  is  made  a 
misdemeanor  punishable  by  fine. 

Missouri. — The  original  anti-trust  legislation  of  Missouri  was  em- 
bodied in  Chapter  128,  Revised  Statutes  1889.  This  was  repealed  by 
statute  approved  April  2,  1891;  to  give  wider  scope,  the  Act  of  1891 
was  amended  April  11,  1895,  and  again  March  24,  1897.  Title,  "An 
Act  providing  for  the  punishment  of  pools,  trusts  and  conspiracies 
to  control  prices,  and  as  to  evidence  and  prosecution  in  such  cases." 
Provisions. — "Section  1.  Any  corporation  organized  under  the  laws 
of  this  or  any  other  state  or  country,  for  transacting  or  conducting 
any  kind  of  business  in  this  state,  or  which  does  transact  or  conduct 
any  kind  of  business  in  this  state,  or  any  partnership  or  individual, 
or  other  association  of  persons  whatsoever,  who  shall  create,  enter 
into,  become  a  member  of,  or  a  party  to,  any  pools,  trusts,  agree- 
ment, combination,  confederation  or  understanding  with  any  other 
corporation,  partnerships,  individual  or  any  other  person  or  as- 
sociation of  persons,  to  regulate  or  fix  the  price  of  any  article 
of  manufacture,  mechanism,  merchandise,  commodity,  convenience, 
repair,  any  product  of  mining,  or  any  article  or  thing  whatsoever,  or 
the  price  or  premium  to  be  paid  for  insuring  property  against  loss 
or  damage  by  fire,  lightning  or  storm,  or  to  maintain  said  price  when 
so  regulated  or  fixed,  or  shall  enter  into,  become  a  member  of  or  a 
party  to  any  pool,  agreement,  contract,  combination  or  confederation 
to  fix  or  limit  the  amount  or  quantity  of  any  article  of  manufacture, 
mechanism,  merchandise,  commodity,  convenience,  repair,  any  product 
of  mining,  or  any  article  or  thing  whatsoever,  or  the  price  or  premium 
to  be  paid  for  insuring  property  against  loss  or  damage  by  fire, 
lightning  or  storm,  shall  be  deemed  and  adjudged  guilty  of  a  con- 
spiracy to  defraud,  and  be  subject  to  penalties  as  provided  in  this 
Act." 

The  provisions  affecting  insurance  companies  do  not  apply  to 
insurance  in  cities  of  more  than  100,000  population,  but  insurance 


MISSOURI.  285 

companies  or  boards  of  fire  underwriters,  which  directly  or  in- 
directly in  such  cities,  agree  or  attempt  to  agree,  directly  or  in- 
directly to  fix  or  regulate  premiums  for  insuring  property  located  out- 
Bide  such  cities  shall  be  deemed  to  have  forfeited  their  right  to  do 
business  in  the  state,  and  to  be  liable  to  all  other  penalties  of  this  Act. 
Sec.  la  declares  to  be  "against  public  policy,  unlawful  and  void." 
any  arrangement,  contract,  agreement  or  combination  which  tends 
to  lessen  full  and  free  competition  in  any  lawful  business  within  the 
state,  or  which  provides  that  any  person  or  corporation  shall  deal  in 
any  particular  article  to  the  exclusion  of  other  and  competing  articles. 
Entering  into  such  arrangement  is  an  act  of  conspiracy  to  defraud, 
and  punishable.  Sec.  2  prohibits  the  issuing  or  owning  of  "trust 
certificates,"  and  the  placing  in  the  hands  of  trustees  the  control  of 
any  corporation  or  combination  or  the  manufactured  products  thereof, 
with  the  intent  to  limit  or  fix  the  price  or  lessen  the  production  and 
sale  of  any  article.  Sec.  3  provides  a  penalty  of  a  fine  of  $5  to  $100 
for  each  day  of  violation  of  this  Act.  Sec.  4  declares  void  any 
contract  or  agreement  made  in  violation  of  this  Act.  Sec.  3  declares 
that  any  purchaser  of  any  article  from  any  individual  or  corporation 
doing  business  in  violation  of  this  Act  shall  not  be  liable  for  the 
price  thereof,  and  may  plead  this  Act  as  defense  to  any  suit  therefor. 
Sec.  6  provides  that  any  domestic  corporation  guilty  of  violating 
this  Act  shall  forfeit  its  corporate  rights  and  franchises,  and  any 
foreign  corporation  so  offending  shall  thereby  forfeit  its  privilege  to 
do  any  business  m  this  state.  The  illegal  act  of  the  agent  of  a  cor- 
poration shall  be  prirna  facie  the  act  of  the  corporation.  Sec.  Oa 
provides  that  whenever  the  rights  of  a  domestic  or  foreign  corpora- 
tion sfaall  have  been  thus  forfeited,  it  shall  be  a  felony  for  any 
person,  association  of  persons  or  corporation  to  deal  in,  sell  or  offer 
for  sale  in  this  state  any  article  made  wholly  or  in  part  thereby,  or 
by  the  successor  or  assigns  thereof.  Penalty:  Penitentiary  imprison- 
ment not  exceeding  three  years,  or  jail  imprisonment  not  exceeding  one 
year,  or  fine  of  $100  to  $1,000,  or  both  fine  and  imprisonment.  Sec.  7 
makes  it  the  duty  of  the  Secretary  of  State  to  inquire  yearly  of  every 
domestic  and  foreign  corporation  doing  business  in  the  statA  whether 
all  or  any  part  of  its  business  is  "with  any  trust,  combination  or  asso- 
ciation of  persons  or  stockholders,"  as  named  in  the  preceding  provis- 
ions of  this  act,  and  to  require  an  answer  under  oath  under  penalty  of 
forfeiture  of  all  corporate  rights  as  in  Sec.  6  preceding.  Sec.  8.  When- 
ever it  is  proven  that  any  domestic  corporation  has  entered  into  any 
trust,  etc.,  in  violation  of  this  Act,  it  shall  be  required  to  make  the 
affidavit  provided  for  in  Sec.  7,  and  in  default  thereof  the  Secretary 
of  State  shall  proceed  forthwith  to  forfeit  its  corporate  rights.  Sec- 
tions 9,  10,  11  and  12  fix  the  duties  and  compensation  of  state  and 
county  officials  in  enforcement  of  this  Act  (circuit  and  prosecuting 
attorneys  receiving  one-fourth  of  penalties  collected),  and  repeal 
Chapter  128,  Revised  Statutes  1889,  entitled  "Pools  and  Trusts." 

[Note. — Under  this  amended  statute  a  leading  test  case  was 
decided  by  the  State  Supreme  Court  in  June,  1899  (State  of  Missouri 
vs.  Firemen's  Fund  et  al.)  The  law  was  declared  constitutional  and 
seventy-two  foreign  fire  insurance  companies  were  convicted  of  com- 
bining and  conspiring  to  fix  and  maintain  uniform  premium  rates. 


286  TRUSTS  OR  COMPETITION  f 

AH  were  forbidden  to  do  further  business  in  the  State.  This  sen- 
tence of  expulsion  was  subsequently  changed  to  a  fine  of  $1,000  each, 
which  the  companies  paid,  and  they  then  continued  in  business  in 
Missouri  on  condition  of  obeying  the  statute  as  thus  construed.] 

During  the  session  of  1899  the  Legislature  of  Missouri  passed 
five  additional  Acts  against  trusts  and  trade  combinations.  The 
first,  approved  April  18,  1899,  makes  verbal  changes  in  the  Act 
of  1897.  The  second,  approved  May  10,  1899,  is  entitled,  "An  Act 
to  prevent  and  restrain  the  continuance  and  operation  of  trusts 
and  monopolies,  and  to  provide  procedure  therefor."  This  is  mainly 
devoted  to  improving  the  procedure  under  former  statutes.  It  also 
specifically  prohibits  all  combinations  or  agreements,  the  intent  or 
effect  of  which  is  to  control  or  limit  trade  or  competition  by  re- 
fusing to  sell  to  or  buy  from  any  other  persons  or  concerns,  because 
the  latter  are  not  members  of  any  trust,  association  or  combination, 
and  prohibits  all  boycotting  and  threatening  of  persons  for  buying 
from  or  selling  to  concerns  not  members  of  such  combines.  The 
third,  approved  May  4,  1899,  provides  drastic  methods  for  securing 
testimony  from  officers  and  employes  of  trusts.  The  fourth  sup- 
plements the  third  along  the  same  line.  The  fifth,  approved  May  23, 
1899,  fixes  the  status  of  foreign  corporations  wishing  to  do  business 
in  Missouri. 

Montana. — The  anti-trust  and  anti-monopoly  legislation  of  Mon- 
tana is  contained  in  the  Enacted  Code  of  1895.  Section  321  reads: 
"Every  person,  corporation,  stock  company  or  association  of  persons 
in  this  state  who,  directly  or  indirectly,  combine  to  form  what  is 
known  as  a  trust,  or  make  any  contract  with  any  person  or  persons, 
corporations  or  stock  companies,  foreign  or  domestic,  through  their 
stockholders,  directors,  officers  or  in  any  manner  whatever  for  the 
purpose  of  fixing  the  price  or  regulate  the  production  of  any  article  of 
commerce  or  of  the  products  of  the  soil  for  commerce  by  the  people, 
or  to  create  or  carry  out  any  restriction  in  trade  to  limit  the  pro- 
duction, or  increase  or  reduce  the  price  of  merchandise  or  com- 
modities, or  to  prevent  competition  in  merchandise  or  commodities  or 
to  fix  a  standard  or  figure  whereby  the  price  of  any  article  of  mer- 
chandise, commerce  or  produce  intended  for  sale,  use  or  consumption 
will  be  in  any  way  controlled,  or  to  create  a  monopoly  in  the  manu- 
facture, sale,  transportation  of  any  such  article,  or  to  enter  into  an 
obligation  by  which  they  shall  bind  others  or  themselves  not  to 
manufacture,  sell  or  transport  any  such  article  below  a  common 
standard  or  figure,  or  by  which  they  agree  to  keep  such  article  for 
transportation  at  a  fixed  or  graduated  figure,  or  by  which  they  settle 
the  price  of  such  article  so  as  to  preclude  unrestricted  competition, 
is  punishable  by  confinement  in  the  state  prison  not  exceeding  five 
years,  or  by  fine  not  exceeding  §10,000,  or  both.  Every  corporation 
violating  the  provision  of  this  section  forfeits  to  the  state  all  its 
property  and  franchises,  and  in  case  of  a  foreign  corporation,  it  is 
prohibited  from  carrying  on  business  in  the  state."  Section  325  pro- 
vides that  this  legislation  shall  not  apply  to  any  arrangement  or  com- 
bination between  laborers  made  with  the  object  of  lessening  the 
number  of  hours  of  labor,  or  increasing  wages,  nor  to  persons  engaged 
in  horticulture  or  agriculture  with  a  view  of  increasing  the  price  of 
their  products. 


NEBRASKA.  287 

Nebraska.— The  Nebraska  statute  now  in  force  repeals  the 
previous  law  (Chapter  XGIa,  entitled  "Trusts,"  of  the  Compiled 
Statutes  of  Nebraska  for  the  year  1895)  and  was  approved  April  8, 
1897.  Title:  "A  bill  or  an  Act  to  define  trusts  and  conspiracies 
against  trade  and  business,  declaring  the  same  unlawful  and  void,  and 
providing  means  for  the  suppression  of  the  same,  and  remedies  for 
persons  injured  thereby,  and  to  provide  punishment  for  violations 
of  this  act,  and  to  repeal,"  etc.  Section  1  of  the  Act  reads:  "That 
a  trust  is  a  combination  of  capital,  skill  or  goods  by  any  person  or 
persons  to  fix  the  price  of  any  article  or  commodity  of  trade,  use  or 
merchandise  with  the  intent  to  prevent  others  from  conducting  or 
carrying  on  the  same  business  or  selling  or  trafficing  with  the  same 
article,  use  or  merchandise,  or  a  combination  of  capital,  skill  or 
goods  by  two  or  more  persons,  or  by  two  or  more  of  them  for  either, 
any  or  all  of  the  following  purposes:  1.  To  create  or  carry  out  re- 
strictions in  trade.  2.  To  limit  or  reduce  the  production  or' increase 
or  reduce  the  price  of  merchandise  or  commodities.  3.  To  prevent 
competition  in  insurance,  either  life,  fire,  accident  or  of  any  other 
kind,  or  in  the  manufacture,  making,  constructing,  transportation, 
Bale  or  purchase  of  merchandise,  produce  or  commodities.  4.  To  fix 
at  any  standard  or  figure  whereby  its  price  to  the  public  shall  be  in 
any  manner  controlled;  to  establish  upon  any  article  of  merchandise, 
produce  or  manufacture  of  any  kind  intended  for  sale,  use  or  com- 
merce in  this  state;  to  establish  any  pretended  agency  whereby  the 
sale  of  any  such  article,  commodity,  merchandise  or  product  shall 
be  covered  or  concealed,  or  made  to  appear  to  be  in  the  original 
vendor  for  the  like  purpose  or  purposes,  and  to  enable  the  original 
vendor,  purchaser  or  manufacturer  to  control  the  wholesale  or  retail 
price  of  any  such  article  of  merchandise,  product  or  commodity  after 
a  trust  as  defined  in  Section  1  is  a  conspiracy  against  trade  and 
the  title  to  the  same  shall  have  passed  from  such  vendor  or  manu- 
facturer. 5.  To  make  or  enter  into,  carry  on  or  carry  out  any  con- 
tract, obligation  or  agreement  of  any  kind  or  description  by  which 
they  shall  bind,  or  have  heretofore  bound,  themselves  not  to  sell, 
dispose  of,  traffic  in  or  transport  any  article  of  merchandise,  com- 
modity or  article  of  trade,  product,  use,  merchandise,  consumption  or 
commerce  below  common  standard  figure,  grade  or  list  price,  or 
by  which  they  shall  agree  in  any  manner  to  keep  the  price  of  such 
article,  product,  commodity  or  transportation  at  a  fixed  or  graduated 
figure,  or  price,  or  by  which  they  shall  in  any  manner  establish  or 
settle  the  price  of  any  article  of  merchandise,  commodity  or  of  in- 
surance, fire,  life  or  accident,  or  transportation  between  them  or 
between  themselves  and  others,  or  with  the  intent  to  preclude,  or 
the  tendency  of  which  is  to  prevent  or  preclude,  a  free  and  unre- 
stricted competition  among  themselves  or  others,  or  the  people  gen- 
erally, in  the  production,  sale,  traffic  or  transportation  of  any  such 
article  of  merchandise,  product  or  commodity,  or  conducting  a  like 
business,  or  by  which  they  shall  agree  to  pool,  combine  or  unite  any 
interest  they  may  have  in  connection  with  the  sale,  production  or 
transportation  of  any  such  article  of  merchandise,  product  or  com- 
modity, or  the  carrying  of  any  such  business  that  its  price  might  in 
any  manner  be  affected  thereby."  Subsequent  sections  provide: 


288  TRUSTS  OR  COMPETITIONt 

That  all  acts  creating,  or  attempting  to  create,  directly  or  indirectly, 
a  trust  as  defined  in  Section  1  is  a  conspiracy  ag.ainst  trade  and 
business  and  unlawful  and  the  penalties  usual  in  anti-trust  statutes 
are  provided;  domestic  corporations  convicted  of  violation  of  the 
act  forfeit  their  charter  and  franchises,  and  foreign  corporations  so 
offending  forfeit  their  right  to  do  business  in  the  state.  Prosecutions 
may  be  brought  by  any  person  in  the  name  of  the  state  against 
any  person  or  persons  violating  any  of  the  provisions  of  this  Act. 

New  Mexico. — Approved  February  4,  1891.  Title:  "An  Act 
declaring  certain  trusts,  pools  and  combinations  illegal,  and  providing 
for  the  punishment  thereof."  Section  1  reads:  "Every  contract  or 
combination  between  individuals,  associations  or  corporations  having 
for  its  object,  or  which  shall  operate  to  restrict  trade  or  commerce, 
or  control  the  quantity,  price  or  exchange  of  any  article  of  manu- 
facture or  product  of  the  soil  or  mine,  is  hereby  declared  to  be  illegal. 
Every  person,  whether  as  individual  or  agent,  or  officer,  or  stock- 
holder of  any  corporation  or  association,  who  shall  make  any  such 
contract,  or  engage  in  any  such  combinations,  shall  be  deemed  guilty 
of  a  misdemeanor,  and  on  conviction  thereof  shall  be  punished  by  a 
fine  not  exceeding  $1,000  nor  less  than  $100,  and  by  imprisonment 
at  hard  labor  not  exceeding  one  year,  or  until  such  fine  has  been 
paid."  Subsequent  sections  provide:  That  it  shall  be  a  mis- 
demeanor to  monopolize,  or  attempt  or  combine  to  monopolize,  any 
part  of  the  trade  or  commerce  of  this  territory,  the  penalty  being  a 
fine  or  imprisonment  or  both.  Contracts  in  contravention  of  this  act 
are  void,  and  purchasers  of  commodities  from  persons  or  concerns 
violating  this  act  are  not  liable  for  the  payment  for  the  same. 

New  York.— Approved  May  7,  1897.  Title:  "An  Act  to  prevent 
monopolies  in  articles  or  commodities  of  common  use  and  to  prohibit 
restraints  of  trade  and  commerce,  providing  penalties  for  violations 
of  the  provisions  of  this  act.  and  procedure  to  enable  the  Attorney- 
General  to  secure  testimony  in  relation  thereto."  Section  1  reads: 
"Every  contract,  agreement,  arrangement  or  combination  whereby 
a  monopoly  in  the  manufacture,  production  or  sale  in  this  state  of 
any  article  or  commodity  of  common  use  is  or  may  be  created, 
established  or  maintained,  or  whereby  competition  in  this  st'ate  in  the 
supply  or  price  of  any  such  article  or  commodity  is  or  may  be  re- 
strained or  prevented,  or  whereby  for  the  purpose  of  creating,  es- 
tablishing or  maintaining  a  monopoly  within  this  state  of  the  manu- 
facture, production  or  sale  of  any  such  article  or  commodity,  the  free 
pursuit  in  this  state  of  any  lawful  business,  trade  or  occupation  is 
or  may  be  restricted  or  prevented,  is  hereby  declared  to  be  against 
public  policy,  illegal  and  void."  Section  2  reads:  "Every  person  or 
corporation,  or  any  officer  or  agent  thereof,  who  shall  make  or  attempt 
to  make  or  enter  hito  any  such  contract,  agreement,  arrangement  or 
combination,  or  who  within  this  state  shall  do  any  act  pursuant 
thereto  or  in  toward  or  for  the  consummation  thereof,  wherever  the 
same  may  have  been  made,  is  guilty  of  a  misdemeanor,  and  on  con- 
viction thereof  shall,  if  a  natural  person,  be  punished  by  a  fine  not 
exceeding  $5,000,  or  by  imprisonment  not  longer  than  one  year, 
"or  by  both  such  fine  and  imprisonment,  and  for  a  corporation  by  a 
fine  not  exceeding  $5,000."  Subsequent  sections  of  the  Act  are  de- 
voted mainly  to  procedure  thereunder. 


OHIO,  NORTH  CAROLINA,  NORTH  DAKOTA.  289 

North  Carolina.— Approved  March  11,  1889.  Title:  "An  Act 
to  prohibit  trusts  in  the  state  of  North  Carolina,  and  to  provide  for 
the  punishment  of  persons  connected  with  them."  Section  1 
reads:  "That  all  combinations  and  trusts  as  defined  by  this  act 
are  unlawful,  dangerous  to  the  liberty  of  the  people,  and  are  hereby 
forbidden  to  be  formed  or  carried  on  in  this  state."  Section  2  reads: 
"That  a  trust  is  an  arrangement,  understanding  or  agreement,  either 
private  or  public,  entered  into  by  two  or  more  persons  or  corporations 
for  the  purpose  of  increasing  or  reducing  the  price  of  the  shares  of 
stock  of  any  company  or  corporation,  or  of  any  class  of  products, 
materials  or  any  manufactured  articles  beyond  the  price  that  would 
be  fixed  by  the  natural  demand  for  or  the  supply  of  such  shares, 
products,  materials  or  manufactured  articles,  and  any  attempt  to 
carry  out  such  price  shall  be  evidence  that  such  an  arrangement, 
understanding  or  agreement  exists."  Subsequent  sections  provide 
the  usual  penalties  and  relate  to  legal  procedure  in  the  act. 

North  Dakota.— Approved  March  0,  1897.  Title:  "An  Act  to 
declare  unlawful  and  void  all  arrangements,  contracts,  agreements, 
trusts  or  combinations  made  with  a  view  to  lessen,  or  which  tend  to 
lessen,  free  competition,"  etc.  Section  1  reads:  "That  all  arrange- 
ments, contracts,  agreements,  trusts  or  combinations  between  per- 
sons or  corporations  made  with  a  view  to  lessen,  or  which  tend  to 
lessen,  full  and  free  competition  in  the  importation  or  sale  of  articles 
imported  into  this  state,  or  in  the  manufacture  or  sale  of  articles 
of  domestic  growth,  or  of  domestic  raw  material,  and  all  arrange- 
ments, contracts,  agreements,  trusts  or  combinations  between  per- 
sons or  corporations  designed,  or  which  tend  to  advance  rates,  or 
control  the  price  or  the  cost  to  the  purchaser  or  to  the  consumer  of 
any  such  product  or  articles,  are  hereby  declared  to  be  against  public 
policy,  unlawful  and  void."  Subsequent  sections  provide:  That  do- 
mestic corporations  violating  this  act  shall  forfeit  their  charters  and 
franchises,  and  that  foreign  corporations  so  offending  shall  be  pro- 
hibited from  doing  business  within  the  state.  Any  violation  of  the 
act  is  declared  to  be  "destructive  of  full  and  free  competition  and 
a  conspiracy  against  trade,"  and  the  usual  penalties  are  provided 
against  individuals. 

Ohio.— Approved  April  19,  1898.  Title:  "An  Act  to  define 
trut  .1  and  to  provide  for  criminal  penalties  and  civil  damages  and 
punishment  of  corporations,  firms,  persons  or  associations,  or  persons 
connected  with  them,  and  to  promote  free  competition  in  commerce 
and  all  classes  of  business  in  the  state."  Section  1  reads:  "That  a 
trust  is  a  combination  of  capital,  skill  or  goods  by  one  or  more 
persons,  firms,  partnerships,  corporations  or  associations  of  persons, 
or  of  any  two  or  more  of  them,  for  either,  any  or  all  of  the  following 

§urposes:  1.  To  create  or  carry  out  restrictions  in  trade  or  commerce. 
.  To  limit  or  reduce  the  production  or  increase,  or  reduce  the  rates 
or  price  of  merchandise  or  any  commodity.  3.  To  prevent  competi- 
tion in  manufacture,  making,  transportation,  sale  or  purchase  of  mer- 
chandise, produce  or  any  commodity.  4.  To  fix  at  any  standard  of 
(or)  figure  whereby  its  price  to  the  public  or  consumer  shall  be  in 
any  manner  controlled  or  established,  any  article  or  commodity  of 

19 


290  TRV8T8  OR  COMPETITION? 

merchandise,  produce  of  commerce  intended  for  sale,  use  or  consump- 
tion in  this  state.  5.  To  make  or  enter  into  or  execute  or  carry  out 
any  contracts,  obligations  or  agreements  of  any  kind  or  description, 
by  which  they  shall  bind  or  have  bound  themselves  not  to  sell,  dis- 
pose of  or  transport  any  article  or  any  commodity  of  trade,  use,  mer- 
chandise, commerce  or  consumption  below  a  common  standard  or 
figure  or  fixed  value,  or  by  which  they  shall  agree  in  any  manner  to 
quote  the  price  of  such  article,  commodity  or  transportation  at  a  fixed 
or  graduated  figure,  or  by  which  they  shall  in  any  manner  establish  or 
settle  the  price  of  any  article,  commodity  or  transportation  between 
them  or  themselves  and  others  so  as  to,  directly  or  indirectly,  pre- 
clude a  free  and  unrestricted  competition  among  themselves  or  any 
purchasers  or  consumers  in  the  sale  or  transportation  of  any  such 
article  or  commodity,  or  by  which  they  shall  agreo  to  pool  or  combine, 
or  directly  or  indirectly  unite  any  interests  that  they  may  have 
connected  with  the  sale  or  transportation  of  any  such  article  or 
commodity,  that  its  price  might  in  any  manner  be  affected.  Every 
such  trust  as  is  defined  herein  is  declared  to  be  unlawful,  against 
public  policy  and  void."  Subsequent  sections  provide  that  domestic 
corporations  offending  against  this  act  shall  forfeit  their  charter 
rights  and  corporate  existence,  and  foreign  corporations  so  offending 
shall  be  prohibited  from  doing  business  within  the  state.  Every 
violation  of  any  of  the  provisions  of  the  act  is  declared  to  be  a  con- 
spiracy against  trade,  and  any  person  convicted  of  such  violation, 
either  as  principal,  manager,  director,  agent,  servant,  employer  or 
any  other  capacity,  is  punishable  by  a  fine  of  $50  to  §5,000,  or  im- 
prisonment from  six  months  to  one  year,  or  by  both.  Each  da_y'3 
violation  of  the  act  constitutes  a  separate  offense.  It  is  made  un- 
lawful to  issue  or  to  own  trust  certificates.  Civil  damage  clause. 

Oklahoma.— Approved  December  25,  1890.  Title:  "An  Act  ^o 
prevent  combinations  in  restraint  of  trade."  Section  1  reads: 
If  any  individual,  firm,  partnership  or  any  association  of  persons 
whatsoever  shall  create,  enter  into,  become  a  member  of  or  a  party 
to  any  pool,  trust,  agreement,  combination  or  understanding,  with 
any  other  individual,  firm,  partnership  or  association  of  persons  what- 
soever, to  regulate  or  fix  the  price  of,  or  prevent  or  restrict  the  com- 
petition in,  the  sale  of  provisions,  food,  fuel,  lumber  or  other  building 
materials,  articles  of  merchandise  or  other  commodity,  they  shall 
be  deemed  guilty  of  a  misdemeanor,  and  upon  conviction  thereof 
shall  be  fined  not  less  than  $50  nor  more  than  $500." 

South  Carolina.— Approved  February  25,  1897.  Title:  "An  Act 
to  prohibit  trusts  and  combinations,  and  to  provide  penalties/' 
Section  1  reads:  "That  from  and  after  the  passage  of  this  act  all 
arrangements,  contracts,  agreements,  trusts  or  combinations  between 
two  or  more  persons  as  individuals,  firms  or  corporations  made  with 
a  view  to  lessen,  or  which  tend  to  lessen,  full  and  free  competition  in 
the  importation  or  sale  of  articles  imported  into  this  state,  or  in 
the  manufacture  or  sale  of  articles  of  domestic  growth,  or  of  domestic 
raw  material,  and  all  arrangements,  contracts,  agreements,  trusts  or 
combinations  between  persons  or  corporations  designed,  or  which 
tend  to  advance  rates  or  control  the  price  or  the  cost  to  the  purchaser 


SOUTH  DAKOTA,  TENNESSEE,  TEXAS.  291 

or  to  the  consumer  of  any  such  product  or  article,  are  hereby  declared 
to  be  against  public  policy,  unlawful  and  void."  Subsequent  sections 
provide  the  usual  penalties  against  domestic  and  foreign  corporations, 
aiid  against  individuals,  and  for  civil  damages  in  case  of  injury. 

South  Dakota.— Approved  March  1,  1897.  Title:  "An  Act  to  en- 
force Section  20  of  Article  17  of  the  Constitution  of  the  state  of 
South  Dakota."  Section  1  reads:  "That  within  the  meaning  of  this 
Act,  a  trust  or  a  monopoly  is  a  combination  of  capital,  skill  or  goods 
of  two  or  more  persons,  firms,  corporations  or  associations  of  persons: 
First:  To  create  or  carry  out  restrictions  in  trade.  Second:  To  limit 
the  production  or  to  increase  or  reduce  the  price  of  commodities. 
Third:  Of  preventing  competition  in  the  manufacture,  competition, 
sale  or  purchase  of  commodities.  Fourth:  To  fix  any  standard  or 
figure  whereby  the  price  to  the  public  shall  be  in  any  manner  estab- 
lished or  controlled,  provided  that  nothing  in  this  act  shall  be  con- 
strued so  as  to  include  labor  organizations."  Subsequent  sections 
provide  the  usual  penalties  against  domestic  and  foreign  corporations, 
and  against  individuals  who  shall  violate  any  provisions  of  the  act. 

Tennessee.— Original  statute  approved  April  6,  1SN9.  Title  of 
amended  act  (March  30,  1891):  "An  Act  to  declare  unlawful  all 
trusts,  pools,  contracts,  arrangements  and  combinations  in  the 
restraint  of  trade,  production,  manufacture  or  sale  to  fix  the 
liability  of  and  punish  persons,  firms  and  corporations  concerned 
therein."  Section  1  reads:  "That  all  trusts,  pools,  contracts,  ar- 
rangements or  combinations  now  existing,  or  hereafter  made  with  a 
view,  or  which  tend  to  prevent  full  and  free  competition  in  the  produc- 
tion, manufacture  and  sale  of  any  article  of  domestic  growth,  pro- 
duction or  manufacture,  or  in  the  importation  and  sale  of  any  article 
of  domestic  growth,  production  or  manufacture,  or  in  the  importa- 
tion and  sale  of  any  article  grown,  produced  or  manufactured  in  any 
other  state  or  country,  or  which  are  designed,  or  tend  to  fix,  regu- 
late, limit  or  reduce  the  price  of  any  article  of  growth,  production  or 
manufacture,  or  which  are  designed,  or  tend  in  any  way  to  create 
a  monopoly,  are  hereby  declared  to  be  unlawful,  ji gainst  public  policy 
and  void."  The  act  provides  the  usual  penalties  of  fine  and  imprison- 
ment for  individuals,  the  forfeiture  of  charter  and  corporate  existence 
for  domestic  corporations,  and  exclusion  from  the  state  for  foreign 
corporations  violating  the  act. 

Texas.— Approved  May  25.  1899.  Title:  An  Act  to  prohibit 
pools,  trusts,  monopolies  and  conspiracies  to  control  business  and 
prices  of  articles;  to  prevent  the  formation  or  operation  of  pools, 
trusts,  monopolies  and  combinations  of  charters  of  corporations  that 
violate  the  terms  of  this  act,  and  to  authorize  the  institution  of 
prosecutions  and  suits  therefor. 

Provisions:  Section  1.  Any  corporation  organized  under  the 
laws  of  this  or  any  other  state  or  country,  and  transacting  or  con- 
ducting any  kind  of  business  in  this  state,  or  any  partnership,  or 
individual,  or  other  association  of  personis  whatsoever,  who  shall 
create,  enter  into,  become  a  member  of  or  a  party  to  any  pool, 
trust,  agreement,  combination,  confederation  or  understanding  with 


292  (TRUSTS  OR  COMPETITION? 

any  other  corporation,  partnership,  individual  or  any  other  person 
or  association  of  persons,  to  .regulate  or  fix  the  price  of  any  article 
of  manufacture,  mechanism,  merchandise,  commodity,  convenience, 
repair,  any  product  of  mining,  or  any  article  or  thing  whatsoever, 
or  the  price  or  premium  to  be  paid  for  insuring  property  against 
loss  or  damage  by  fire,  lightning  or  storm,  or  to  maintain  said 
price  when  so  regulated  or  fixed,  or  shall  enter  into,  become  a  mem- 
ber of  or  a  party  to  any  pool,  agreement,  combination,  contract,  as- 
sociation or  confederation  to  fix  or  limit  the  amount  or  quantity 
of  any  article  of  manufacture,  mechanism,  merchandise,  commodity, 
convenience,  repair,  any  product  of  mining,  or  any  article  or  thing 
whatsoever,  or  the  price  or  premium  to  be  paid  for  insuring  property 
against  loss  or  damage  by  fire,  lightning,  storm,  cyclone,  tornado, 
or  any  other  kind  of  policy  issued  by  any  corporation,  partnership, 
individual,  or  association  of  persons  aforesaid,  shall  be  deemed  and 
adjudged  guilty  of  a  conspiracy  to  defraud,  and  to  be  subject  to 
the  penalties  as  provided  by  this  act. 

Sec.  2.  Defines  monopoly  to  be  any  union  or  combination  of 
capital,  credit,  property,  assets,  trade  or  custom,  skill  or  acts,  or  of 
any  other  valuable  thing,  whereby  any  one  or  more  of  the  things 
prohibited  by  this  Act  are  accomplished  or  sought  to  be  accomplished, 
or  which  tend  to  produce  results  herein  prohibited;  and  all  monopoly 
is  pronounced  contrary  to  public  policy  and  prohibited  under  severe 
penalty. 

The  Act  further  prohibits  manufacturers  in  Texas  of  any  article 
from  raw  materials  produced  within  the  state  from  selling  at  less 
than  cost  or  giving  away  such  articles  for  the  purpose  of  driving 
out  or  financially  injuring  competitors.  It  prohibits  the  formation  of 
any  pool  or  arrangement  to  control  prices  or  limit  competition,  or 
the  boycotting  of  any  competitor  because  he  does  not  join  such 
combination.  It  forbids  any  new  association  to  withhold  its  news 
from  any  publisher  desiring  the  same  because  he  is  not  a  member 
of  such  association;  requires  every  owmer  of  a  patent  for  any 
process  for  preparing  for  market  any  raw  material  produced  in 
Texas  to  place  the  same  or  rights  thereunder  upon  the  market  so 
that  no  monopoly  under  the  same  shall  exist.  It  prohibits  the 
sale,  delivery  or  disposition  in  the  state  of  any  articles  manufactured 
within  the  state  or  elsewhere  in  violation  of  this  Act,  and  the  pur- 
chaser of  any  such  articles  shall  not  be  required  to  pay  for  the  same 
if  so  purchased.  Severe  penalties  attach  to  the  violation  of  the 
Act,  both  fines  and  imprisonment. 

Utah. — Approved  March  9,  1806.  Title:  "An  Act  prohibiting 
and  providing  for  the  punishment  of  persons,  copartnership,  as- 
sociations and  corporations  forming  pools,  trusts,  combinations  or 
conspiracies,"  etc.  Section  1  reads:  "Any  combination  by  persons 
having  for  its  object  or  effect  the  controlling  of  the  prices  of  any  pro- 
fessional services,  any  products  of  the  soil  or  of  any  article  of  manu- 
facture or  commerce,  or  the  cost  of,  exchange  or  transportation,  is 
prohibited  and  will  be  declared  unlawful.  Any  person  who  shall 
violate  the  foregoing  provisions  shall  be  subject  to  prosecution  and 
punishment  as  hereinafter  provided."  The  act  provides  against  cor- 


WASHINGTON,  WISCONSIN,  CANADA.  293 

porations  and  individuals  violating  its  provisions  the  penalties  usual 
in  anti-trust  statutes. 

Washington.— Section  22  of  Article  XII  of  the  Constitution  of  the 
State  of  Washington  provides  that  "monopolies  and  trusts  shall  never 
be  allowed  in  this  state,  and  that  no  incorporated  company,  copart- 
nership or  association  of  persons  in  this  state  shall,  directly  or  in- 
directly, combine  or  make  any  contract  with  any  other  incorporated 
company,  foreign  or  domestic,  through  their  stockholders  or  the  trustee 
or  assignees  of  such  stockholders,  or  with  any  copartnership  or  «s- 
sociation  of  persons,  or  in  any  manner  whatever  for  the  purpose  of 
fixing  the  price  or  limiting  the  production,  or  regulating  the  transporta- 
tion of  any  product  or  commodities.  "The  Legislature  is  required  to 
pass  laws  for  the  enforcement  of  this  section.  The  only  anti-trusc 
legislation  adopted  by  the  legislature  of  Washington  was  approved 
March  21,  1895.  Title:  "An  Act  to  Regulate  the  Sale  of  Farm, 
Dairy,  Orchard  or  Garden  Produce  on  Commission."  The  entire  Act 
reads  as  follows:  "It  shall  be  unlawful  for  persons  engaged  in  the 
business,  or  commission  merchants,  to  enter  into  any  combination, 
conspiracy  or  pool  for  the  purpose  of  artificially  raising  or  depressing 
the  market  prices  of  any  farm,  dairy,  orchard  or  garden  produce,  or  to 
exclude  from  the  market  the  produce  of  any  particular  locality  grown 
or  manufactured  for  any  person." 

Wisconsin.— Approved  April  27,  1897.  Title:  "An  Act  to  Pre- 
vent Corporations  Organized  Under  the  Laws  of  this  State,  From 
Entering  Into  Any  Combination,  Conspiracy,  Trust,  Agreement  or 
Contract  Intended  to  Operate  in  Restraint  of  Any  Lawful  Trade  or 
Commerce  Carried  On  In  this  State."  Section  1  reads:  "Corpora- 
tions organized  under  the  laws  of  this  state  are  prohibited  from  enter- 
ing into  any  combination,  conspiracy,  trust,  pool,  agreement  or  con- 
tract intended  to  restrain  or  prevent  competition  in  the  supply  or 
price  of  any  article  or  commodity  in  general  use  in  this  state,  or  con- 
stituting a  subject  of  trade  or  commerce  therein,  or  to  control  the 
price  of  any  such  article  or  commodity,  or  regulate  or  fix  the  price 
thereof;  to  regulate  or  limit  the  amount  or  quantity  thereof  to 
be  manufactured,  mined,  produced  or  sold  in  this  state,  or  to  fix  any 
standard  or  figure  by  which  its  price  to  the  public  shall  be  in  any 
manner  controlled  or  established."  The  usual  procedure  and  penalties 
follow. 

ANTI-TRUST  LAW  OF  CANADA. 

In  1892  the  Dominion  Parliament  enacted  Section  520  of  the 
Criminal  Code  as  follows: 

"520.  Every  one  is  guilty  of  an  indictable  offense  and  liable 
to  a  penalty  not  exceeding  four  thousand  dollars  and  not  less  than 
two  hundred  dollars,  or  to  two  years'  imprisonment,  and  if  a  cor- 
poration, is  liable  to  a  penalty  not  exceeding  ten  thousand  dollars 
and  not  less  than  one  thousand  dollars,  who  conspires,  combines, 
agrees  or  arranges  with  any  other  person,  or  with  any  railway, 
steamship,  steamboat  or  transportation  company,  unlawfully— 

(a)  to  [unduly]  limit  the  facilities  for  transporting,   producing, 


204 

manufacturing,  supplying,  storing  or  dealing  in  any  article  or  com- 
modity which  may  be  a  subject  of  trade  or  commerce;  or 

(b)  to  restrain  or  injure  trade  or  commerce  in  relation  to  any 
such  article  or  commodity;  or 

(c)  to    [unduly]    prevent,    limit,    or   lessen    the    manufacture   or 
production  of  any  such  article  or  commodity,  or  to  [unreasonably] 
enhance  the  price  thereof;  or 

(d)  to  [unduly]  prevent  or  lessen  competition  in  the  production, 
manufacture,    purchase,    barter,    sale,    transportation    or    supply    or 
any  such  article  or  commodity,  or  in  the  price  of  insurance  upon 
person  or  property. 

On  August  11,  1899,  the  Parliament  passed  a  significant  amend- 
ment by  striking  out  the  word  "unduly"  in  paragraphs  (a),  (c)  and 
(d),  and  by  striking  out  the  word  "unreasonably"  in  paragraph  (c),  as 
marked  in  brackets  above. 


ATTITUDE  OF  LABOR  LEADERS. 

The  attitude  of  the  leaders  of  organized  labor  in  the  United 
States  toward  the  monopoly  trust  system  at  the  beginning  of  the 
year  1900  may  be  thus  summarized:  They  advise  no  crusade  against 
trusts,  first  because  they  apprehend  that  anti-trust  measures  may,  on 
occasion,  be  used  against  the  labor  unions  themselves;  and,  second, 
because  in  their  judgment  the  trust  movement  is,  with  sufficient 
rapidity  and  with  entire  certainty,  leading  up  to  that  form  of  socialism 
which  consists  in  government  ownership  and  management  of  all  great 
industries — see  the  resolutions  adopted  at  the  annual  meeting  of  the 
American  Federation  of  Labor  held  in  Detroit  in  December,  1899. 
The  obvious  comment  on  such  an  attitude  is  this:  1.  Anti-trust 
statutes,  or  laws  against  conspiracy  and  monopoly,  can  only  be  in- 
voked against  abuses  of  the  right  of  combination  among  workingmen— 
as  in  the  case  of  the  Debs  riot  in  189-4,  which  by  destructive  violence 
obstructed  interstate  commerce  and  the  United  States  mails.  Good 
citizens,  whether  wage-earners  or  otherwise,  approve  of  suppressing 
riot,  preserving  order  and  protecting  property  and  life.  Organized  la- 
bor, acting  within  the  lines  of  good  citizenship,  has  nothing  to  fear 
from  anti-trust  legislation.  That  battle  has  been  fought  and  won, 
and  the  great  body  of  workingmen  evidently  take  this  view.  2.  If  it 
is  true  that  the  trust  movement  is  leading  up  to  socialism  the  mass  of 
workingmen,  in  common  with  the  people  generally,  will  see  in  this 
fact  a  reason  for  opposing,  not  acquiescing  in,  that  movement. 
Whatever  the  leaders  may  think,  the  rank  and  file  of  wage-earners 
in  the  United  States  have  not  been  bitten  by  the  socialistic  flea. 


CHAPTER  XI. 
LIST  OF  LEADING  AMERICAN  TRUSTS. 


The  130  principal  trusts  and  consolidations  in  the  United  States,  each 
capitalized  at  $10,000,000  or  more,  embraced  in  the  subjoined  list,  repre- 
sent an  aggregate  capital  in  stock  and  bonds  as  follows: 

Common   stock    $2,784,218,000 

Preferred   stock    1,141,643,030 

Bonds    88,288,000 


$4,014,119,000 

Estimated  combined  capital  (stock  and  bonds)  of  general  cor- 
porate trusts  in  the  United  States  of  less  than  $10,000,000 
each 600,000,000 

Estimated  capital  (stock  and  bonds)  of  local  corporate  trusts 
In  the  United  States,  each  having  a  virtual  monopoly  in  its 
own    field,    not    including    tramway    or    transportation    com- 
panies, syndicates,  "combines"  or  other  trade  agreements. .     385,851,000 


Approximate  grand  total  $5,000,000,000 


Any  list  of  American  trusts  is  necessarily  incomplete  very  soon 
after  its  date,  since  new  ones  are  constantly  forming,  but  inasmuch 
as  most  leading  manufacturing  industries  in  this  country  have 
now  been  merged  in  trusts,  subsequent  additions  are  likely  to  be 
relatively  unimportant.  The  following  list  has  been  compiled  at 
the  close  of  1899,  from  all  accessible  sources  of  information.  Special 
acknowledgments  are  due  to  Mr.  Byron  W.  Holt,  whose  compilation 
pul  l:«hed  in  the  Review  of  Reviews  and  in  the  Commercial  Year 
Book  for  1899  were  very  full  at  the  date  of  their  publication;  to  the 
editors  of  the  New  York  Commercial  and  Financial  Chronicle,  and 

295 


296 

to  Mr.  Charles  R.  Flint  of  New  York,  who  has  courteously  fur- 
nished the  editor  all  the  data  gathered  by  his  own  house. 

The  present  conservative  exhibit  is  intended  simply  to  give  in- 
formation as  to  the  number  and  character  of  leading  American  in- 
dustries which  have  been  practically  unified  under  a  single  owner- 
ship, and  the  amount  for  which  each  consolidation  is  capitalized  in 
stock  and  bonds  combined.  Wherever  the  facts  have  been  obtain- 
able only  the  amount  of  securities  actually  issued  is  given-  herein. 
The  aim  has  been  to  include  only  such  industrial  undertakings 
as  involve  the  combination  of  two  or  more  concerns,  and  for  the 
most  part  each  organization  named  is  a  typical  trust,  which  means 
a  single  corporation  that  has  purchased  the  plants  and  businesses 
of  all  or  a  great  majority  of  competing  concerns  in  the  same  line 
in  the  country  so  as  to  control  the  industry  and  enjoy  a  virtual 
monopoly  thereof.  Obviously,  in  this  sense,  such  corporations  as 
the  Federal  Steel  and  Republic  Steel  are  not  strictly  trusts,  for  un- 
til they  themselves  consolidate  they  are  in  substantial  competition. 
Only  those  general  trusts  are  embraced  in  the  list  which  have  a 
capitalization  of  ten  million  dollars  or  more.  The  lesser  ones, 
usually  consolidating  small  industries,  are  very  numerous,  and  in 
the  aggregate  represent  a  large  volume  of  capital. 

Dividing  trusts  into  local  and  general,  the  former  have  been 
omitted  in  the  interest  of  brevity  and  clearness,  and  only  the  latter 
included.  Ass  an  example  of  what  is  meant  by  local  trusts,  of 
which  a  very  large  number  exist,  the  Maryland  Brewing  Company, 
with  a  capital  of  $13,800,000,  has  purchased  and  now  operates 
plants  representing  six-sevenths  of  the  brewing  capacity  of  Balti- 
more and  vicinity,  and  aims  to  absorb  the  remainder.  IndiTstries 
like  this,  which  are  necessarily  local  and  limited  in  character,  seem 
to  be  quite  as  much  the  subject  of  monopolization  as  are  those  of 
national  scope.  In  a  few  instances,  organizations  are  listed  which 
are  incomplete,  and  some  of  these  may  fail  of  consummation  be- 
cause of  the  greater  caution  manifested  by  banks  and  investors 
and  the  comparative  disfavor  into  which  many  trust  securities  have 
already  fallen. 

With  two  or  three  exceptions,  by  way  of  example,  no  mention 
is  made  of  those  innumerable  trade  agreements  or  understandings 
Which  exist  throughout  the  country  among  independent  and  com- 
peting concerns  for  the  purpose  of  somewhat  regulating  competition, 
such  as  associations  of  wholesale  dealers,  express  companies  and 
other  common  carriens,  insurance  corporations,  retailers  in  oer- 


LIST  OF  LEADING  TRUSTS.  297 

tain  lines  and  some  manufacturing  interests.  Such  voluntary  asso- 
ciations for  mutual  protection  against  destructive  forms  of  business 
rivalry  seldom  fix  and  could  not  long  maintain  exorbitant 
prices,  and  otherwise  they  have  little  in  common  with  the  typical 
monopoly  trusts.  Most  exhibits  of  trust  organizations  hitherto 
published  have  included  the  largest  of  these  loose  trade  associa- 
tions, giving  approximate  estimates  of  capital  involved,  thus  abnor- 
mally swelling  the  aggregate  of  capital  purporting  to  be  represented 
by  the  trust  movement.  This  ill-advised  practice  has  resulted  in 
the  widely  published  estimate  of  eight  thousand  million  dollars  as 
the  total  capitalization  of  trusts— a  great  exaggeration.  With  few 
exceptions  we  have  also  omitted  all  those  legitimate  "industrials" 
which  are  simply  great  independent  corporations  engaged  in  large- 
scale  production,  but  having  and  seeking  no  monopoly  advantage, 
like  Carnegie's  and  the  Baldwin  Locomotive  Works.  The  capital 
of  each  organization,  as  given  herein,  includes  common  stock,  pre- 
ferred stock  and  bonds.  Of  the  one  hundred  and  thirty  concerns 
listed  only  nineteen  have,  so  far  as  known,  issued  bonds.  Of  the  total 
capitalization  named  herein  it  is  a  reasonable  estimate  that  60 
per  cent,  is  "water."  Ninety-five  per  cent,  of  the  trusts  here  named 
were  organized  in-  New  Jersey,  although  not  more  than  five  per 
cent,  of  them  have  plants,  or  offices  other  than  technical,  in  that 
state. 

CAPITAL. 

Amalgamated  Copper  Company   $75,000,000 

American  Agricultural  Chemical  Company  (23  fertilizer  plants)..  40,000,000 

American  Alkali  Company   30,000,000 

American  Beet  Sugar  Company  19,000,000 

American  Bicycle  Company   40,000,000 

American  Car  and  Foundry  Company  (railroad  cars) 55,000,000 

American  Cotton  Oil  Company  (123  properties) 33,600,000 

American   Electric  Heating  Corporation    10,500,000 

American  Fisheries  Company  (Menhaden  oil,  18  companies) 10,000,000 

American  Window  Glass  Company  (majority  in  the  TJ.  S.) 30,000,000 

American  Gas  and  Electric  Lighting  Fixture  Company 15,000,000 

American   Hide  and   Leather  Company    60,000,000 

American  Ice  Company  (to  control  output  of  Maine) _, 60,000,000 

American  Linseed  Oil  Company  (82  plants,  85  per  cent  In  country).  28,500,000 

American    (Sewing)    Machine   Company    10,000.000 

American  Malting  Company  (30  companies;  nearly  nil  in  the  U.  S.)  29,000,000 

American  School  Furniture  Company  11,500.000 

American  Ship  Building  Company   30,000,000 

American  Silk   Manufacturing  Company  (silk  thread) 12,500,000 

American  Smelting  and  Refining  Company    54,000,000 

American  Spirits  Manufacturing  Company  (whisky;  18  districts).  37,000,000 
American  Steel  and  Wire  Company  (controls  wire  Industry,  etc., 

In   the   U.    S.)    90,000,000 


298  TRUSTS  OR  COMPETITION? 

CAPITAL. 

American  Steel  Hoop  Company  $33,000,0*1 

American  Sugar  Refining  Company   74,000,000 

American  Thread  Company  (13  cotton  thread  companies) 18,000,000 

American  Tin  Plate  Company  (290  mills,  practically  all  in  U.  S.).  50,000,000 

American  Tobacco  Company  (plug  business  sold  in  1898) 61,000,000 

American  Woolen  Company  (men's  woolens,  mills  in  New  Eng- 
land)     65,000,000 

American  Writing  Paper  Company  42,000,000 

American  Bridge  Company  (incomplete)  65,000,000 

American  Chicle  Company  (chewing  gum  trust) 10,000,000 

American  Grass  Twine  Company   15,000,000 

American  Iron  and  Steel  Company 25,000,000 

American  Plumbing  Supply  Company   .- 35,000,000 

American    Pneumatic    Service    15,000,000 

American  Radiator  Company    10,000,000 

American   Railway    Equipment   Company    22,000,000 

American  Switch   Company   11,000,000 

American  Thresher  Company  (forming  to  control  70  per  cent  of 

plants   in   the    U.    S.) 60,000,000 

American  Vinegar  Company     * 11,000,000 

American  Watch  Machine  Company  12,000,000 

American  Window  Glass  Company  17,000,000 

Asphalt  Company  of  America  30,000,000 

Atlantic  Snuff  Company  (all  but  two  companies  in  U.  S.) 10,000,000 

Bessemer    Ore    Association    20,000,000 

Borden  Condensed  Milk  Company  20,000,000 

California  Wine  Makers'  Corporation  (allied  with  California  Wine 

Association)    10,000,000 

Central   Lumber  Company  of  California   70,000,000 

Chemical   Association   (combination   of  pharmaceutical   manufac- 
tories)  50,000,000 

Columbian  and  Electric  Car  Lighting  and  Brake  Company 10,000,000 

Consolidated  Ice  Company  (12  companies  in  New  York,  Philadel- 
phia and  Maine)  11,250,000 

Consolidated  Rubber  Tire  Company  10,000,000 

Consolidated  Street  Car  Company  18,000,000 

Continental   Cement   Company    10,000,000 

Continental   Tobacco  Company   (7  plug  companies  and  plug  in- 
terests of  American  Company)  92,000,000 

Diamond   Match   Company    11,000,000 

Distilling  Company  of  America  125,000,000 

Dominion  Iron  and  Steel  Company  20,000,000 

Electric  Boat  Company  10,000,000 

Electric  Storage  Battery  Company  (absorbed  competitors  in  1895).  18,500,000 

Edison   Portland  Cement   Company    11,000,000 

Federal   Carriage  Company    20,000,000 

Federal  Printing  Ink  Company   20,000,000 

Glucose   Refinery  Company    40,000,000 

Indo-Egyptian    Compress   Company    15,000,000 

International  Cement  Company  50,000,000 

International  Paper  Company  (25  news  print  paper  manufactur- 
ers east  of  Chicago-)    49,000,000 

International  Car  Wheel  Company   15,000,000 

International    Pump   Company    27,500,000 

International  Silver  Company  (24  companies;  75  per  cent  of  silver 

plate  In  U.  S.)  19,000,000 


LIST  OF  LEADING  TRUSTS.  299 

CAPITAL. 

International  Smokeless  Powder  and  Dynamite  Company   $10,000,000 

Kern  Incandescent  Light  Company   12,000,000 

Lake  Superior  Consolidated  Iron  Mines 28,752,000 

Marsden  Company  of  Philadelphia  (cellulose  trust) 32,000,000 

Mt.  Vernon  Woodbury  Cotton  Duck  Company  23,500,000 

National  Biscuit  Company  (90  per  cent  of  large  bakeries  in  the 

U.    S.)    54,000,000 

National  Carbon  Company  (all  companies  in  the  U.  S.  and  three- 
fourths  in  the  world)  10.000,000 

National  Carpet  Company  (not  completed)   50,000,000 

National  Enameling  and  Stamping  Company  (consolidating  four 

principal  companies  in  the  U.  S.)  30,000,000 

•National  Lead  Compary  (26  plants  for  white  lead,  etc.) 30,000,003 

National   Car  Equipment  Company    10,000,000 

National  Electric  Company   25,000,003 

National   Glass  Company    20,000,000 

National  Tin  Plate  and  Stamping  Ware  Company 20,000,000 

National  Salt  Company  (95  per  cent  in  the  U.  S.) 12,000,000 

National  Screw  Company   10,000,000 

National  Starch  Manufacturing  Company  (20  plants;  price  agree- 
ment with  other  companies)   11,000,000 

National    Steel    Company    58,000,000 

National  Tube  Company  (absorbs  17  corporations)  65,000,000 

National  Wall  Paper  Company  (forming  by  absorption  of  30  com- 
panies or  more)  35,500,000 

New  England  Cotton  Yarn  Company 10,000,000 

New  England  Electric  Vehicle  and  Transportation  Company 23,1)00,000 

New   York   Electric  Vehicle  Company    25,000,000 

Otis  (passenger)   Elevator  Company   (13  companies;  85  per  cent 

product  in  the  U.  S.)  10,000,000 

Planters'    Compress    Company    15,000,000 

Pittsburg  Plate  Glass  Company    10,000,000 

Pressed   Steel   Car  Company    '. .  25,000,000 

Print  Cloth  Pool  (30  mills;  restricts  production  aud  fixes  prices)  50,000,000 

Reading  Company  (anthracite  coal  trust)   150,000,000 

River  Coal  Operators'  Company  (Pittsburg  to  New  Orleans) 11,000,00-) 

Royal  Baking  Powder  Company  (consolidation  of  all  companies). .  20,000,000 
Rubber   Goods    Manufacturers'    Company    (consolidation    of    me- 
chanical goods  companies)    50,000,000 

Standard  Distilling  and  Distributing  Company  (whisky) 21,000,000 

Standard  Oil  Company  (owns  83  per  cent  U.  S.  refineries,  etc.) 110,000,000 

Sloss,  Sheffield  S.  and  I.  Company  20,000,000 

Standard  Rope  and  Twine  Company '(sells  through  Union  Selling 

Company)     22,400,000 

Steel  Beams  Association  (fixes  prices)  20,000,OJO 

Steel  Rail  Manufacturing  Association  (agreement;  all  large  com- 
panies)     50,OGO,OJO 

Swift   &  Co.   (beef)   17,500,000 

Tennessee  Coal,   Iron  and  Railroad  Company   (plants  in  Tennes- 
see  and   Alabama)    30,700,000 

Union  Bag  and   Paper  Company    27,000,OOJ 

Union  Steel  and  Chain  Company  60,000,000 

Union  Tobacco  Company    19,000,000 

Union  Typewriter  Company  (five  leading  corporatioLs) 13,000,000 

United   Fruit  Company   20,000,000 


300  TRUSTS  OR  COMPETITION' 

CAPITAL. 

United   Lighting   and   Heating   Company    (eight    companies;    oil 

lighting  interests  in  the  U.   S.)   $12,000,000 

United   Shoe   Machinery   Company    . ". 17,000,000 

United  States  Cast  Iron  Pipe  and  Foundry  Company  (13  com- 
panies; practically  total  capacity  in  the  U.  S.)  30,000,000 

United  States  Dye  Wood  and  Extracts  Company  (uniting  all  in 

the   U.    S.)    10,000,000 

United    States    Envelope    Company    10,000,000 

United  States  Flour  Milling  Company  50,000,000 

United  States  Glue  Company   40,000,000 

United  States  Leather  Company  70,000,000 

United  States  Rubber  Company  (controls  boot  and  shoe  output  of 

the  U.  S.)   52,000,000 

United  States  Varnish  Company   (practically   whole  capacity  in 

the  U.   S.)   38,000,003 

United  States  Vehicle  Company   25,000,000 

United  States  Worsted  Company  70,000,000 

Union  Match  Company  10,000,000 

Westinghouse  Electric  and  Manufacturing  Company  (owns  the 
U.  S.  Electric  Locomotive  Company  and  Water  Company,  and 
pools  with  General  Electric)  16,000,000 


Incidental  confirmation  of  Mr.  Percy  Sanderson's  statement  herein 
concerning  trusts  in  Great  Britain  is  furnished  in  a  press  cablegram  from 
London,  showing  that  only  at  the  close  of  1899  is  the  real  trust  movement 
reaching  England  from  New  York,  and  that  the  success  of  the  movement 
there  depends  upon  the  stability  of  the  American  trusts,  after  which 
the  British  organizations  are  patterned.  The  following  appeared  in  the 
Chicago  Tribune  of  December  28,  1899,  as  a  "special  cable  to  the  Chicago 
Tribune  by  Arthur  L.  Clarke,"  and  under  the  heading  "New  Trusts  in 
England:" 

"London,  Dec.  27.— The  December  break  In  industrials  on  Wall  street 
was  not  particularly  welcome  to  London  operators.  The  trust  idea  is  just 
beginning  to  take  root  in  England.  Already  several  big  combinations 
In  the  cotton  industry  have  been  floated,  the  latest  with  a  capital  of 
$75,000,000.  Others  equally  big  are  hatching.  Any  collapse  in  American 
industrials  is.  therefore,  a  matter  of  grave  concern  to  English  promoters, 
who  base  their  prospective  profits  on  American  precedents.  The  result 
will  possibly  lead  to  freer  dealings  in  industrials,  placing  these  among 
the  international  list,  the  only  difficulty  probably  being  in  getting  the 
American  trust  stocks  listed  on  the  London  Stock  Exchange,  but  In  Its 
present  temper  even  this  is  hardly  an  insuperable  obstacle." 


INDEX. 

CHAPTER  I. 
THE  ARGUMENT  FOR  THE  TRUST.    (Editorial.) 

Free  Competition  a  Failure,  15— Waste  Through  Competition,  17— Natural  Evo- 
lution of  the  Trust,  18— Economies  of  Large-Scale  Production,  19— Advantages  to 
Wage-Earners,  20— Better  Relations  Between  Labor  and  Capital,  21— Benefit  to  the 
Public,  22— Banishment  of  War  Methods;  A  Needed  Industrial  Balance-Wheel,  23— 
Production  Adjusted  to  Consumption,  24 — Lower  Prices  and  Better  Goods,  25 — 
Enlargement  of  Our  Foreign  Trade,  26— Improved  Access  by  the  People  to  Indus- 
trial Investments,  27— Advantage  to  Outgoing  Manufacturers,  28— Some  Criticisms 
Answered;  Displacement  of  Former  Employees,  28— No  DinuHution  in  Aggregate 
Production  or  in  Labor  Required,  29— Status  of  Workingmen  Not  Impaired,  29— 
Traveling  Salesmen,  30— Trusts  Not  Monopolies,  31— "Potential"  or  Possible  Com- 
petition a  Sufficient  Restraint  Upon  Trusts,  32— Alleged  Evils  of  Overcapitalization 
83— An  Accomplished  Revolution,  and  Legally  Indestructible. 

A  FURTHER  FAVORABLE  VIEW  (by  Dr.  Albert  Shaw,  editor  of  the  Review  of 
Reviews),  36-42:  The  Combination  of  Capital;  Railroad  Amalgamation,  36— Advan- 
tages of  United  Management;  Public  Welfare  Not  Menaced,  37— Socialism  or  Public 
Ownership  of  Industries  a  Subsequent  Issue,  38— Transitional  Distuibances;  the 
Rights  of  Monopoly,  39 — Freedom  of  Combination,  with' Regulation;  Magnitude  of 
Monopoly  Movement,  40— Cohesive  Power  of  the  Trusts;  Great  Fortunes  and 
the  Trusts,  41. 

CHAPTER  II. 

THE  ARGUMENT  AGAINST  THE  TRUST.    (Editorial.) 

Explanatory;  No  War  on  Capital  and  Corporations,  43-46— Competition  the 
Schoolmaster  of  the  Race  and  Not  a  Failure,  47 — Causes  and  Genesis  of  the  Trust; 
the  Trust  an  Economic  Impertinence,  49— Germ  of  the  Trust  Idea,  50— The  Standard 
Oil  and  the  Sugar  Trust  as  Inciting  Examples;  Method  of  Trust  Building,  52- Plants 
Overvalued;  Capital  Inflated,  54— Expert  Testimony,  55- The  Men  Behind  the 
Trust,  57— Trusts  the  Result  of  Monopoly-Hunger,  Not  of  Natural  Evolution,  58— 
Logic  of  the  Deadly  Parallel  Column,  59— Trusts  Make  Economy  of  Production  a 
Pretext  for  Monopoly;  Do  Trusts  Exist  in  Europe?  A  Negative  Answer  with 
Proofs,  60— Some  Trust  Benefits  Fictitious;  Others  O"erstated,  62— Little 
Economic  Advantage  in  Mere  Unified  Ownership  of  Scattered  Factories,  63— Benefits 

301 


302  INDEX. 

of  Large-Scale  Production  Stop  Short  of  Monopoly,  63— Cost  of  Marketing  Product. 
64— Trusts  Not  Necessary  to  Enlargement  of  Our  Foreign  Trade,  with  Proofs,  65— 
The  Ethical  Side,  66— Effect  of  Trusts  on  Towns  and  the  Smaller  Cities,  67— Concen- 
tration and  Eastward  Movement  of  Factories,  69 — Trusts  and  the  Farmer,  the  New 
Sectionalism,  70— Trusts  and  the  Workingman  72— The  Closed  Door  of  Opportunity 
for  Young  Men,  75 — Competition,  Actual,  Potential  and  Spurious,  78 — Tbe  Giant  and 
His  Club;  an  Economic  Parable,  80— Fictitious  and  Tolerated  Competitors,  81— A 
System  of  Universal  Private  Monopoly  Invoked,  82— Specimens  of  Monopolistic 
Vermin,  83— Monopoly- Trusts  and  Socialism,  84— As  to  Monopoly  Prices,  Present 
and  Future,  85-88— Appendix:  Concerning  Trusts  in  Europe,  Continued,  90-94— 
Latinizing  American  Character,  94 — The  Central  Wrong  of  Overcapitalization,  95— 
Trusts  vs.  "Large  Corporations,"  96— A  Trust  Denned,  97. 


CHAPTER  III. 
THE  COLLEGE  AND  THE  TRUST. 

Views  of  Some  Professors  of  Political  Economy:  Cornell  University,  Prof.  Jenks: 
General  Statement  of  Questions  Raised  by  the  Trust  Movements,  99 — Effects  on 
Middlemen;  Legislation,  103.  Yale  University,  Pres.  Hadley :  Formation  and  Con- 
trol of  Trusts,  104— Railway  Pools,  105— Futility  of  Most  Legal  Prohibitions,  10G— 
Monopolies  Usually  Shortsighted  and  Greedy,  108— Methods  for  Regulating  Monop- 
olies, 110.  Columbia  University,  Prof.  Clark:  The  Problem  Outlined;  Large  Cap- 
ital, Centralized  Production  and  Monopoly  Often  Confounded  in  the  Public  Mind, 
112— Can  Monopoly  be  Expelled  from  the  Trust?  113— Discrimination  in  Selling 
Prices,  the  Chief  Weapon  of  the  Trusts  Against  Competitors,  115.  University  of 
Michigan,  Prof.  Adams:  Natural  and  Arbitrary  Monopolies,  117 — A  Point  Beyond 
Which  It  Is  Unprofitable  to  Enlarge  Manufacturing  Plants,  118— Social  and  Political 
Results  of  Trusts,  118— Origin  and  Causes;  Legislation,  Federal  and  State  Control, 
119.  Williams  College,  Prof.  Bullock:  Artificial  Stimulus  to  Trust  Formation- 
Limitation  of  Large-Scale  Economies— Permanence  of  Monopoly  Uncertain— Com- 
petition in  Some  Form  an  Indestructible  Principle,  120-121.  Institute  of  Sodai 
Economics,  Prof.  Gunton:  Industrial  Evolution— Advantages1  of  Large  Plants  and 
Corresponding  Capitalization— Monopoly  Element  in  Trust  System  Denied  or  Ignored 
—Editorial  Comment,  122-126.  Oberlin  College,  Prof.  Carver:  Trust  System  Not  a 
New  Thing— A  Natural  Adjustment  of  Supply  to  Consumption,  128.  Dartmouth 
College,  Prof,  Dixon:  Nutureofthe  Trust— Its  Place  in  Modern  Economic  Develop- 
ment—Should  Interference  be  Regulative  or  Destructive?  128.  University  of  Chi- 
cago, Prof.  Brooks:  Early  History  of  the  Trust  System— Its  Yet  Undeveloped  Char- 
acter— Ultimate  Results  Unknown — A  Result  of  Economic  Advance— State  Control 
Will  Follow  Its  Abuse  of  Privilege,  129-131.  Bureau  of  Economic  Eesearch,  Prof 
Bemis:  Competitive  Methods  Often  Destructive— Charges  Against  the  Trusts— Peril 
to  Political  Purity  and  Personal  Liberty— Remedies  Suggested,  132-134.  University 
of  Wisconsin.  Prof.  Ely:  Summary  of  His  Forthcoming  Book  Entitled.  "Monopolies 
and  Trusts,"  134-137— Mr.  Rockefeller's  Suggestions,  with  Editorial  Comment,  138. 


INDEX.  303 

CHAPTER  IV. 
THE  CHICAGO  CONFERENCE  ON  TRUSTS. 

Editorial  Comment,  139— Address  by  Hon.  W.  J.  Bryan:  All  Private  Monopoly 
Indefensible  and  Intolerable,  143— Evident  Purposes  of  the  Trust,  144— Brains  Need 
Not  Apply,  145— Some  Causes  of  Trusts,  146— Seductive  Provisions  of  New  Jersey 
and  Delaware  Corporation  Laws,  147— Certain  Remedies  Suggested,  148— Form  of 
Federal  Action,  149— Monopoly  Breeds  Aristocracy,  153— The  Farmer  and  the  Trust, 
154— Hon.  W.  Dudley  Foulke,  155-157— Hon.  Bourke  Cockran,  158— Gov.  Pingree  of 
Michigan,  158— T.  B.  Walker,  159— Atty.  Gen.  Crow  and  Gov.  Atkinson,  160. 

CHAPTER  V. 

THE  QUESTION  OF  REMEDIES.    (Editorial.) 

Are  any  Remedies  Needed?— If  so,  Shall  They  Cure  by  Regulation  or  Removal?— 
Concerning  Regulation  and  Palliation— Impracticability  of  Most  Proposed  Remedies 
— Twenty-one  Suggestions  from  Eminent  Sources— Analysis  of  the  Leading  Ones — 
Plans  of  Messrs.  Bryan  and  Cockran— Concerning  Remedy  by  Trust  Disintegration 
—Extirpation  Less  Difficult  than  Regulation— Does  the  Common  Law  Permit  any 
Refuge  for  Private  Monopoly?— Negative  Answer  by  the  Courts  thus  Far— State  and 
Federal  Judiciary  Likely  to  Furnish  an  Early  and  Satisfactory  Solution  of  Trust 
Problem,  161-174. 

CHAPTER  VI. 

THE  COURTS  AND  THE  TRUSTS. 

A  Notable  Judicial  Decision,  175— The  Addyston  Pipe  Company  Case,  179— 
Status  of  the  Trusts  Under  Federal  Laws,  181— Attitude  and  Temper  of  the  U.  S. 
Supreme  Court  Toward  Monopoly  Trusts,  184— The  Illinois  Glucose  Case,  186— 
"Concert  Without  Compact"  Judicially  Approved,  190— Supreme  Court  of  Michi- 
gan on  Monopolies,  192— Labor  Combinations  and  the  Courts,  193. 

CHAPTER  VII. 

THE  STANDARD  OIL  TRUST. 

Historical  Sketch  and  Defense  by  Its  Attorney— Origin  and  Development— Pur- 
poses of  Its  Founders— Methods  Pursued  and  Results  Accomplished — As  to  Discrim- 
inating Railroad  Rates — Treatment  of  Competitors— Improvement  and  Cheapening 
of  Product— Why  the  Standard  Trust  is  Criticised— Editorial  Comment;  The  Mari- 
etta Transportation  Episode;  A  300  Per  Cent  Advantage;  Some  Conclusions,  194- 
207. 


304  INDEX. 

CHAPTER  VIII. 
LEGAL  STATUS  OF  THE  TRUST  SYSTEM. 

The  Law  and  the  Trust  (Editorial):  Newness  of  Trust  Legislation  and  Court 
Decisions— Attitude  of  American  Law  Toward  Monopoly— Genesis  of  our  Anti-Trust 
Statutes— Reasons  for  Their  Extreme  Provisions— Combination  to  Compete  versus 
Combination  to  Monopolize,  208-213 — Trusts  Under  the  Federal  Constitution  by  John 
T.  Dye  of  the  Indianapolis  Bar:  The  Extent  and  Limits  of  Legislative  Control  over 
Freedom  of  Contract — The  Case  Stated— Power  of  Congress  in  the  Premises— Power 
of  State  Legislatures — Sacredness  of  Private  Property — Inalienable  Right  of  Every 
Citizen  to  do  What  he  Will  with  his  Own— One  Corporation  may  Lawfully  Purchase 
the  Assets  and  Business  of  all  Others— The  Resulting  Suppression  of  Competition, 
No  Bar  to  the  Transaction— The  Modern  Monopoly  Trust  Legally  Unassailable,  214- 
229— Judge  Cooley  on  the  Common  Law,  Its  Origin  and  Nature,  230— The  Mogul 
Steamship  Case,  231— Mr.  Beach  on  the  Future  of  the  Trust.  234— Views  of  Presidents 
Harrison,  Cleveland  and  McKinley,  234-236. 

CHAPTER  IX. 
TRUST  MISCELLANY. 

The  Trust  in  Politics  (Editorial),  238-240— The  Tariff  and  the  Trust  (Editorial). 
241— The  Department  Store:  Objections  to  It  Stated  and  Answered— Views  of  Hon 
John  Wanamaker,  243-246 — Trusts  and  Organized  Labor:  Views  of  President 
Gompers.  of  American  Federation  of  Labor,  and  of  General  Secretary  White,  of  the 
United  Garment  Workers  of  America,  247-249— The  Flour  Milling  Industry,  Views 
of  Ex-Gov.  Pillsbury,  250— A  Voice  from  New  England,  Senator  W.  E.  Chandler, 
251-254— The  St.  Louis  Anti-Trust  Conference  of  Governors,  254— Comment  by 
Gov.  Sayers,  of  Texas — Some  Special  Trade  Combinations  in  England  Explained  by 
Their  Organizer,  E.  J.  Smith,  258— Some  Criticisms  Thereon,  260— The  Populist 
Position,  as  Stated  by  Senator  Marion  Butler,  261— Gov.  Theodore  Roosevelt,  263— 
Bank  Sentiment,  264— Pres.  Havemeyer  of  the  Sugar  Trust,  265—4  Chapter  of  Pos- 
sible History  (A.  D.  1925):  A  Backward  Glance— Rise  and  Decline  of  the  Trust 
System— Vision  of  an  Optimistic  Pessimist— A  Taste  of  Socialism— An  Untimely 
Interruption— All's  well  that  ends  well,  266-273. 

CHAPTER  X. 
ANTI-TRUST  LEGISLATION. 

Synopses  of  All  Existing  Statutes  Against  Trusts  and  Other  Monopolies  Enacted 
by  Congress,  by  Twenty-nine  State  Legislatures  and  by  the  Canadian  Parliament, 
274-294— Attitude  of  Labor  Leaders,  294. 

CHAPTER  XI. 

List  of  Leading  American  Trusts  with  Scope  and  Capitalization,  295-300. 


